nep-bec New Economics Papers
on Business Economics
Issue of 2011‒10‒15
twenty-one papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Let's take bargaining models seriously: The decline in union power in Germany, 1992 - 2009 By Hirsch, Boris; Schnabel, Claus
  2. Business Cycle Effects of Credit and Technology Shocks in a DSGE Model with Firm Defaults By Pesaran, M. H.; Xu, T.
  3. Multi-product firms and business cycle dynamics By Antonio Minniti; Francesco Turino
  4. Stability in a Cournot duopoly under asymmetric unionism By Luciano Fanti; Luca Gori
  5. The dynamics of a differentiated duopoly with quantity competition By Luciano Fanti; Luca Gori
  6. Stability analysis in a Bertrand duopoly with different product quality and heterogeneous expectations By Luciano Fanti; Luca Gori
  7. Intrafirm Conflicts and Interfirm Price Competition By Werner Güth; Kerstin Pull; Manfred Stadler
  8. Innovation and Corporate Dynamics: A Theoretical Framework By Jakub Growiec; Fabio Pammolli; Massimo Riccaboni
  9. Il ruolo dell'età della dimensione nella crescita occupazionale delle PMI Italiane. By Marco Corsino; Roberto Gabriele; Sandro Trento
  10. Productivity, sunk costs and firm exit in the French food industry By Blanchard, Pierre; Huiban, Jean-Pierre; Mathieu, Claude
  11. Corporate Social Responsibility and Firms Ability to Collude By L. Lambertini; A. Tampieri
  12. Firm start-up strategies and performance in France: Survival and growth By Jean Bonnet, University of Caen Basse-Normandie - CREM-CNRS; Nicolas Le Pape, University of Caen Basse-Normandie - CREM-CNRS; Teresa Nelson, Simmons College School of Management - Boston
  13. The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool By Orley C. Ashenfelter; Daniel S. Hosken; Matthew C. Weinberg
  14. The Impact of Cultural Diversity on Innovation: Evidence from Dutch Firm-Level Data By Ozgen, Ceren; Nijkamp, Peter; Poot, Jacques
  15. The Relationship Between Strategic Choices and Performance in Italian Food SMEs: A Resource-based Approach By Carraresi, Laura; Mamaqi, Xhevrie; Albisu, Luis Miguel; Banterle, Alessandro
  16. Measuring flexibility of multi-output firms: a primal and a dual measure By Renner, Swetlana; Hockmann, Heinrich; Glauben, Thomas
  17. New Business Start-ups and the Business Cycle By Coles, Melvyn G; Kelishomi, Ali Moghaddasi
  18. The Overseas Subsidiary Activities and Their Impact on the Performance of Japanese Parent Firms By EDAMURA Kazuma; Laura HERING; INUI Tomohiko; Sandra PONCET
  19. Does high involvement management improve worker wellbeing? By Böckerman, Petri; Bryson, Alex; Ilmakunnas, Pekka
  20. How Does Personal Bankruptcy Law Affect Start-ups? By Cerqueiro, G.M.; Penas, M.F.
  21. Contractors’ Strategic Approaches to Risk Assessment Techniques at Project Planning Stage By Ahmad Zaini, Afzan; Endut, Intan Rohani; Takim, Roshana

  1. By: Hirsch, Boris; Schnabel, Claus
    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. -- Dieser Beitrag versucht unter Verwendung des right-to-manage-Modells kollektiver Verhandlungen aus den beobachteten Lohnabschlüssen auf die entsprechende Gewerkschaftsmacht zurückzuschließen. Wir leiten einen zeitvarianten Indikator gewerkschaftlicher Stärke her und berechnen ihn mit Jahresdaten für Deutschland. Die Ergebnisse deuten darauf hin, dass die Gewerkschaftsmacht in den 1990er Jahren relativ stabil war, aber von 1999 bis 2007 deutlich (um fast ein Drittel) zurückging. Zwei Drittel dieses Rückgangs der Gewerkschaftsmacht gehen auf eine Verringerung der Lohnquote relativ zur Kapitaleinkommensquote zurück, während Veränderungen im Abstand zwischen dem Nettolohn und dem Einkommen bei Arbeitslosigkeit für das restliche Drittel verantwortlich sind.
    Keywords: trade union power,wage bargaining,labour share,Germany
    JEL: J50 J51
    Date: 2011
  2. By: Pesaran, M. H.; Xu, T.
    Abstract: This paper proposes a theoretical framework to analyze the impacts of credit and technology shocks on business cycle dynamics, where firms rely on banks and households for capital financing. Firms are identical ex ante but differ ex post due to different realizations of firm specific technology shocks, possibly leading to default by some firms. The paper advances a new modelling approach for the analysis of financial intermediation and firm defaults that takes account of the financial implications of such defaults for both households and banks. Results from a calibrated version of the model highlights the role of financial institutions in the transmission of credit and technology shocks to the real economy. A positive credit shock, defined as a rise in the loan to deposit ratio, increases output, consumption, hours and productivity, and reduces the spread between loan and deposit rates. The effects of the credit shock tend to be highly persistent even without price rigidities and habit persistence in consumption behaviour.
    JEL: E32 E44 G21
    Date: 2011–10–07
  3. By: Antonio Minniti (Facoltà di Economia); Francesco Turino (Universidad de Alicante)
    Abstract: Recent empirical evidence provided by Bernard et al. (2010) and Broda and Weinstein (2010) shows that a significant share of product creation and destruction in U.S. industries occurs within existing firms and accounts for a relevant share of aggregate output. In the present paper, and consistently with this evidence, we relax the standard assumption of mono-product firms that is typically made in dynamic general equilibrium models. Building on the work of Jaimovich and Floetotto (2008), we develop an RBC model with multi-product firms and endogenous markups to assess the implications of the intra-firm extensive margin on business cycle fluctuations. In this environment, the procyclicality of product creation emerges as a consequence of strategic interactions among firms. Because of the proliferation effect induced by changes in product scope, our model embodies a quantitatively important magnification mechanism of technology shocks.
    Keywords: Multi-product Firms, Business Cycles, Firm Dynamics.
    JEL: E32 L11
    Date: 2011–09
  4. By: Luciano Fanti; Luca Gori
    Abstract: We analyse the stability issue in a Cournot duopoly with asymmetric unionism and heterogeneous players. We show that labour market institutions matter or the stability of the unique interior Cournot-Nash equilibrium. Interestingly, the role played by the existence of firm-specific unions on stability, when the degree of unionism is asymmetric between the two firms, is at all different depending on whether the (more) unionised firm has bounded rational or naive expectations. Indeed, a shift in the union’s preference from employment towards wages acts as an economic (de)stabiliser when workers are paid with the (competitive) unionised wage by the bounded rational firm and with the (unionised) competitive wage by the naïve firm.
    Keywords: Bifurcation; Cournot; Heterogeneous expectations; Monopoly union.
    JEL: C62 D43 J51 L13
    Date: 2011–01–09
  5. By: Luciano Fanti; Luca Gori
    Abstract: We analyse the dynamics of a Cournot duopoly game with heterogeneous players to investigate the effects of micro-founded differentiated products demand. The present analysis, which modifies and extends Zhang et al. (2007) Zhang, J., Da, Q., Wang, Y., 2007. Analysis of nonlinear duopoly game with heterogeneous players. Economic Modelling 24, 138–148) and Tramontana, F., (2010) (Tramontana, F., 2010. Heterogeneous duopoly with isoelastic demand function. Economic Modelling 27, 350–357), reveals that a higher degree of product differentiation may destabilise the market equilibrium. Moreover, we show that a cascade of flip bifurcations may lead to periodic cycles and ultimately chaotic motions. Since a higher degree of product differentiation implies weaker competition, then a theoretical implication of our findings, that also constitute a policy warning for firms, is that a fiercer (weaker) competition tends to stabilise (destabilise) the unique positive Cournot-Nash equilibrium of the economy.
    Keywords: Bifurcation; Chaos; Cournot; Oligopoly; Product differentiation.
    JEL: C62 D43 L13
    Date: 2011–01–09
  6. By: Luciano Fanti; Luca Gori
    Abstract: We study the local stability properties of a duopoly game with price competition, different product quality and heterogeneous expectations. We show that the Nash equilibrium can loose stability through a flip bifurcation when the consumer’s type range increases. This result occurs irrespective of whether the high(low)-quality firm has either bounded rational (naïve) or naïve (bounded rational) expectations about the price that should be set in the future by the rival to maximise profits. Therefore, although, on the one hand, an increase in the consumer’s types range increases profits, on the other hand, it contributes to reduce the parametric stability region of the unique interior equilibrium. Moreover, we show that the stability region is larger when the high-quality firm has naïve expectations and the low-quality firm has bounded rational expectations. This implies that when the expectations formation mechanism of the high-quality firm becomes more complicated than the naïve one, and, in particular, it follows the mechanism proposed by Dixit (1986), the stability of the Nash equilibrium in a duopoly market with price competition becomes under increasing strain.
    Keywords: Bifurcation; Different product quality; Duopoly; Heterogeneous players; Price competition.
    JEL: C62 D43 L13 L15
    Date: 2011–01–09
  7. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Kerstin Pull (University of Tübingen, Department of Economics and Business Administration); Manfred Stadler (University of Tübingen, Department of Economics and Business Administration)
    Abstract: We study interfirm price competition in the presence of horizontal and vertical intrafirm conflicts in each firm. Intrafirm conflicts are captured by a principal-agent framework with firms employing more than one agent and implementing a tournament incentive scheme. The principals offer premium incentives in the sense of revenue shares to which agents react by proposing a sales price. Introducing such intrafirm conflicts results in higher prices and lower effort levels. Increasing the number of agents lowers the optimal surplus share of the agents as well as the individual effort and the sales prices. Firm profits first increase and then decrease when employing more and more agents suggesting that principals should employ an intermediate number of agents.
    Keywords: Price competition, Agency theory
    JEL: C72 L22 M52
    Date: 2011–10–05
  8. By: Jakub Growiec; Fabio Pammolli; Massimo Riccaboni
    Abstract: We provide a detailed analysis of a model of innovation and corporate dynamics that encompasses the Gibrat’s Law of Proportionate Effect and the Simon growth process as particular instances. The predictions of the model are derived in terms of (i) firm size distribution, (ii) the distribution of firm growth rates, and (iii-iv) the relationships between firm size and the mean and variance of firm growth rates. We test the model against data from the worldwide pharmaceutical industry and find its predictions to be in good agreement with empirical evidence on all four dimensions.
    Keywords: Business firm size; firm growth distribution; Gibrat's Law; Pareto distribution; lognormal distribution, size-variance relationship.
    JEL: C49 L11 L25 L65
    Date: 2011–08
  9. By: Marco Corsino; Roberto Gabriele; Sandro Trento
    Abstract: This paper empirically investigates gross job flows and the growth patterns of continuing limited liability companies in Italy over the period 1996-2004, using original data on work forces and other characteristics of the firm. The descriptive analysis reveals that the magnitude of gross job flows among small and medium-sized companies in Italy is lower than what observed in Anglo-Saxon countries, but it is consistent with evidence for the Euro area. Alongside, the magnitude of job flows significantly shrunk in the aftermath of the economic downturn in 2001: firms fared worse than in the late nineties and the labour market became less efficient in allocating job opportunities. The econometric analysis shows that size negatively affects firms’ net employment growth, even though the negative correlation vanishes among companies with more than 24 employees. The impact of age on growth is complex: new ventures and firms that are at most 14 years old outperform the average firm in the sample. On the contrary, age does not have any bearing on the growth of units aged 15 years and more, and it even represents a burden among the oldest firms in the sample.
    Keywords: Gross job flows, firm growth, firm size, firm age
    JEL: J62 L25 L60
    Date: 2011–07
  10. By: Blanchard, Pierre; Huiban, Jean-Pierre; Mathieu, Claude
    Keywords: Agribusiness,
    Date: 2011
  11. By: L. Lambertini; A. Tampieri
    Abstract: We examine a duopoly with polluting production where firms adopt a form of corporate social responsibility (CSR) to define their objective functions. Our analysis focusses on the bearings of CSR on collusion over an infinite horizon, sustained by either grim trigger strategies or optimal punishments. Our results suggest that assigning a weight to consumer surplus has a pro-competitive e¤ect under both full and partial collusion. Conversely, a higher impact of productivity on pollution has an anti-competitive effect under partial collusion, while exerting no effect under full collusion. Under partial collusion, the analysis of the isoquant map of the cartel reveals that complementarity arises between the two weights.
    JEL: H23 L13 L41
    Date: 2011–08
  12. By: Jean Bonnet, University of Caen Basse-Normandie - CREM-CNRS; Nicolas Le Pape, University of Caen Basse-Normandie - CREM-CNRS; Teresa Nelson, Simmons College School of Management - Boston
    Abstract: Essential performance outcomes of the new firm, including survival and growth, are related to financial and operational factors of the firm. We present a model that shows that firm financing via debt has some influence on types of market outreach, survival, and also growth of new firms in France. Using a robust, longitudinal dataset of the population of firms throughout the country established, continuing, and closing over the period of 2002 to 2007 (available through the French government via the SINE Survey: Système d’informations sur les nouvelles entreprises), we show that for a given indebtedness of the new firm, the entrepreneurial behavior generally improves the survival and the growth of new ventures.
    Keywords: High growth new firms, Aggressiveness, Indebtedness, Model, Performance.
    JEL: L2 C3 C41
    Date: 2011–10
  13. By: Orley C. Ashenfelter; Daniel S. Hosken; Matthew C. Weinberg
    Abstract: Many experts speculate that U.S. antitrust policy towards horizontal mergers has been too lenient. We estimate the price effects of Whirlpool’s acquisition of Maytag to provide new evidence on this debate. We compare price changes in appliance markets most affected by the merger to markets where concentration changed much less or not at all. We estimate price increases for dishwashers and relatively large price increases for clothes dryers, but no price effects for refrigerators or clothes washers. The combined firm’s market share fell across all four affected categories and the number of distinct appliance products fell.
    JEL: K2 K21 L11 L4
    Date: 2011–10
  14. By: Ozgen, Ceren (VU University Amsterdam); Nijkamp, Peter (VU University Amsterdam); Poot, Jacques (University of Waikato)
    Abstract: Due to the growth in international migration in recent decades, the workforce of firms in host countries has become considerably more diverse, both demographically and culturally. It is an important question for firms and for governments to ask whether there are some productivity-enhancing externalities gained from this growing diversity within firms. In recent years migration research has demonstrated positive economic impacts of cultural diversity on productivity and innovation at the regional level. However, there is a dearth of research on the links between innovation and migrant diversity at the firm level. In this paper we construct and analyse a unique linked employer-employee micro-dataset of 4582 firms, based on survey and administrative data obtained from Statistics Netherlands. Excluding firms in the hospitality industry and other industries that employ low-skilled migrants, we use the local number of restaurants with foreign cuisines and the historical presence of migrant communities as valid instruments of endogenous migrant settlement. We find that firms in which foreigners account for a relatively large share of employment are somewhat less innovative. However, there is strong evidence that firms that employ a more diverse foreign workforce are more innovative, particularly in terms of product innovations.
    Keywords: immigration, innovation, cultural diversity, knowledge spillovers, linked employer-employee data, Netherlands
    JEL: F22 O31
    Date: 2011–10
  15. By: Carraresi, Laura; Mamaqi, Xhevrie; Albisu, Luis Miguel; Banterle, Alessandro
    Abstract: In the context of progressive rise of the competition among firms, due to the increasing globalisation, it is interesting to understand the potential sources of competitive advantage in order to set up a successful strategy. The theory of Resource-based View used in this framework examines the connection among internal resources and strategic choices, and how the latter affect firm performance. The firm strategy is determined by available resources and capabilities which are deployed to obtain a good performance. Therefore, strategic choices act in between resources and performance. The purpose of the paper is to evaluate the relationship between strategic choices and performance achieved by food SMEs, based on a set of distinctive resources. This approach is assessed in food SMEs located in Italy, by applying a Structural Equation Model. The results of the empirical analysis showed that, in the food sector, strategic choices based on innovation, product positioning, and chain relationship development have positive effects on performance, but only if distinctive resources and capabilities are considered. Innovation plays a capital role because of its direct as well as indirect effects.
    Keywords: resource-based view, strategic choices, SMEs, food sector, structural equation modelL11, L25, L66, Q13, Agribusiness,
    Date: 2011
  16. By: Renner, Swetlana; Hockmann, Heinrich; Glauben, Thomas
    Keywords: Industrial Organization,
    Date: 2011
  17. By: Coles, Melvyn G; Kelishomi, Ali Moghaddasi
    Abstract: This paper considers new business start-up activity within a stochastic equilibrium model of unemployment. The resulting job creation process is both natural and tractable, and generates equilibrium unemployment and vacancy dynamics which match the volatility and persistence observed in the data. The insight is that the standard Diamond/Mortensen/Pissarides matching framework works beautifully once the free entry of vacancies assumption is replaced by a model of business start-up activity. The approach is particularly important as it is demonstrated that a large part of net job creation in the U.S. economy can be attributed to new business start-ups.
    Keywords: aggregate dynamics; equilibrium unemployment; startups
    JEL: E24 E32 J63 J64
    Date: 2011–10
  18. By: EDAMURA Kazuma; Laura HERING; INUI Tomohiko; Sandra PONCET
    Abstract: We investigate whether previous findings of only limited effects of investing abroad on the performance of parent firms can be explained by the aggregation of heterogeneous effects depending on the motive for foreign direct investment (FDI), sector, and location. Our results suggest, in line with previous work, that on average outward Japanese FDI has limited effects (either positive or negative) on the activity of internationalizing firms at home in the initial years after investment. However, our empirical findings confirm previous insights that the effect of moving abroad is heterogeneous depending on the affiliate sector (manufacturing versus non-manufacturing) and region of location (in USA or Europe versus in Asia). For FDI in the non-manufacturing sector located in USA or Europe, we find a positive impact on parent firm productivity. Further, we find a negative impact on parent firm employment from FDI in Asia.
    Date: 2011–10
  19. By: Böckerman, Petri; Bryson, Alex; Ilmakunnas, Pekka
    Abstract: Employees exposed to high involvement management (HIM) practices have higher subjective wellbeing, fewer accidents but more short absence spells than “like” employees not exposed to HIM. These results are robust to extensive work, wage and sickness absence history controls. We present a model which highlights the possibility of higher short-term absence in the presence of HIM because it is more demanding than standard production and because multi-skilled HIM workers cover for one another’s short absences thus reducing the cost of replacement labour faced by the employer. We find direct empirical support for the assumptions in the model. Consistent with the model, because long-term absences entail replacement labour costs for HIM and non-HIM employers alike, long-term absences are independent of exposure to HIM.
    Keywords: health; subjective wellbeing; sickness absence; job satisfaction; high involvement management; high performance work system
    JEL: M53 J81 J28 M54 M52 I10
    Date: 2011–10–03
  20. By: Cerqueiro, G.M.; Penas, M.F. (Tilburg University, Center for Economic Research)
    Abstract: We analyze the effect of changes in U.S. state personal exemptions on the financing structure and performance of a representative sample of start-ups. An increase in the amount of borrower’s personal wealth protected in bankruptcy reduces the availability of bank credit to all start-ups. Owners of unlimited liability businesses, who benefit from the increase in wealth insurance, offset the reduction in bank credit by investing more money in the firm. We find no such response for start-ups whose entrepreneurs’ personal wealth is already protected by limited liability. Consequently, corporations experience lower growth rates and higher failure rates, while proprietorships performance is not negatively affected.
    Keywords: Debtor protection;bankruptcy;start-ups;credit availability;agency problems.
    JEL: G32 G33 K35 M13
    Date: 2011
  21. By: Ahmad Zaini, Afzan; Endut, Intan Rohani; Takim, Roshana
    Abstract: Abstract — The construction industry is still plagued by poor quality, poor workmanship, poor safety and health environment, and poor practices. The current main problem in the Malaysian Construction Industry is delayed projects under the Ninth Malaysia Plan. The idea of introducing formal risk assessment among Malaysian contractors during the project planning stage is a proactive approach to achieve project objectives. Therefore, this research intends to achieve the following objectives: (1) to investigate the contractors’ approaches of risk assessment techniques at the project planning stage, (2) to investigate the consequences of risk assessment techniques at the project planning stage, and (3) to determine the appropriate risk assessment techniques in dealing with the potential risk factors at the project planning stage. The research methodology applied for this research includes literature reviews and questionnaires. Findings from this research show that the application of risk assessment techniques in the Malaysian Construction Industry is still moderate. Hence, it is suggested that these contractors should try to implement formal risk assessment techniques during the project planning stage in order to achieve the project objectives.
    Keywords: Keywords - Risk; Risk Assessment; Contractors; Project Planning Stage; Construction Industry
    JEL: G3 L7
    Date: 2011–09–25

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