nep-bec New Economics Papers
on Business Economics
Issue of 2012‒01‒25
thirty papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. The Masquerade Ball of the CEOs and the Mask of Excessive Risk By Citci, Haluk; Inci, Eren
  2. Detecting Propagation Effects by Observing Aggregate Distributions: The Case of Lumpy Investments By Luigi Guiso; Chaoqun Lai; Makoto Mirei
  3. The Theory of the Firm goes Global By Marin, Dalia
  4. Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better? By Douglas L. Kruse; Joseph R. Blasi; Richard B. Freeman
  5. On the distributional properties of size, profit and growth of Icelandic firms By Einar Jón Erlingsson; Simone Alfarano; Marco Raberto; Hlynur Stefánssonn
  6. On the distributional properties of size, pro fit and growth of Icelandic firms By Erlingsson, Einar Jón; Alfarano, Simone; Raberto, Marco; Stefánsson, Hlynur
  7. CEO and Board Characteristics as Determinants of Private Benefits of Control: Evidence from the Russian Stock Exchange By Berezinets, Irina; Ilina, Yulia; Muravyev, Alexander
  8. Exporters, Spin-outs and Firm Performance By Lööf, Hans; Nabavi, Pardis
  9. Financial intermediary balance sheet management By Tobias Adrian; Hyun Song Shin
  10. Product differentiation and systematic risk: theory and empirical evidence By Bazdresch, Santiago
  11. How Acid are Lemons? Adverse Selection and Signalling for Skilled Labour Market Entrants By Robert Wagner; Thomas Zwick
  12. The Effect of Relative Standing on Considerations about Self-employment By Stefan Schneck
  13. A simple model of discontinuous firm’s growth By D'Elia, Enrico
  14. Expectations-driven cycles in the housing market By Lambertini, Luisa; Mendicino , Caterina; Punzi , Maria Teresa
  15. International Capital Flows and House Prices: Theory and Evidence By Jack Favilukis; David Kohn; Sydney C. Ludvigson; Stijn Van Nieuwerburgh
  16. How Do Industries and Firms Respond to Changes in Local Labor Supply? By Dustmann, Christian; Glitz, Albrecht
  17. News Shocks, Productivity and the U.S. Investment Boom-Bust Cycle By Lilia Karnizova
  18. Analisi dei modelli d’impresa: discontinuità e sviluppo By D'Elia, Enrico; Nascia, Leopoldo; Zeli, Alessandro
  19. The Nature of Financial and Real Business Cycles: The Great Moderation and Banking Sector Pro-Cyclicality By Balázs Égert; Douglas Sutherland
  20. Thousands of models, one story: current account imbalances in the global economy By Michele Ca' Zorzi; Alexander Chudik; Alistair Dieppe
  21. Coalitional Approaches to Collusive Agreements in Oligopoly Games. By Sergio Currarini; Marco Marini
  22. How a Smart Follower Becomes a Top Performer: An Institutional Innovation Perspective on Competitive Advantage By Jacques Brook
  23. Decentralised bargaining and performance related pay: new evidence from a panel of Italian firms By Mirella Damiani; Andrea Ricci
  24. Relational Adaptation in Buyer-Supplier Relationship Management: A Synthesis of Effects of Exchange Hazards, Relational Norms, and Legitimacy By S. Sheng; Y. Bao; L. Lessassy; K. H. Lai; T. Leung; Christina Wong
  25. Employment Protection and Business Cycles in Emerging Economies By Lama, Ruy; Urrutia, Carlos
  26. How to measure Corporate Social Responsibility By Marco Nicolosi; Stefano Grassi; Elena Stanghellini
  27. Firm-Level Labour Demand: Adjustment in Good Times and During the Crisis By Jan Babecky; Kamil Galuscak; Lubomir Lizal
  28. "Are Japanese Firms Becoming More Independent from Their Banks?: Evidence from the Firm-Level Data of the "Corporate Enterprise Quarterly Statistics," 1994-2009" By Yoshiro Miwa
  29. Productivity and Openness: Firm Level Evidence in Brazilian Manufacturing Industries By Wenjun Liu; Shoji Nishijima
  30. Much to tell to consumers about CSR, but who should talk or not talk about it? By Béatrice Parguel; Florence Benoît-Moreau

  1. By: Citci, Haluk; Inci, Eren
    Abstract: We analyze the effects of CEOs' layoff risk on their risk choice while overseeing a firm. A CEO, whose managerial ability is unknown, is fired if her expected ability is below average. Her risk choice changes the informativeness of output and market's belief about her ability. She can decrease her layoff risk by taking excessive risk and trade off current compensation for layoff risk. The firm may voluntarily or involuntarily allow excessive risk taking even under optimal linear compensation contracts. Above-average CEOs always keep their jobs, but among below-average CEOs, a higher-ability one is more likely to be fired.
    Keywords: career concern; CEO turnover; excessive risk taking; managerial conservatism; reputation
    JEL: L21 G32 D82 M12 J33
    Date: 2012
  2. By: Luigi Guiso (European University Institute and EIEF); Chaoqun Lai (Utah State University); Makoto Mirei (Hitotsubashi University)
    Abstract: By using an extensive panel data set of Italian firms, we show empirically that the fraction of firms that engage in a lumpy investment follows a non-normal, double-exponential distribution across region-year. We propose a simple sectoral model that generates the double-exponential distribution that arises from the complementarity of the firms' lumpy investments within a region. We calibrate the degree of complementarity by estimating an individual firm's behavior with the firm-level data. Simulations show that the degree of complementarity estimated at the firm level is consistent with the double-exponential fluctuations observed at the aggregate level.
    Date: 2011
  3. By: Marin, Dalia
    Abstract: What insights can be gained from bringing the theory of the firm to the global economy? I discuss several new features of the world economy that can be explained by incorporating the theory of the firm into the theory of international trade. Among the new features I discuss are the move to flatter corporate hierarchies and the decentralization of authority in firms, the “war for talent”, the rise of CEO pay in rich countries, organizational convergence across countries, and firm heterogeneity.
    Keywords: International Trade and Organizations; Firm heterogeneity; Organizational convergence; Decentralization in the firm; The rise of CEO pay
    JEL: F23 D21 L22
    Date: 2012–01
  4. By: Douglas L. Kruse; Joseph R. Blasi; Richard B. Freeman
    Abstract: This paper analyzes the linkages among group incentive methods of compensation, labor practices, worker assessments of workplace culture, turnover, and firm performance in a non-representative sample of companies: firms that applied to the “100 Best Companies to Work For in America” competition from 2005 to 2007. Although employers with good labor practices self- select into the 100 Best Companies firms sample, which should bias the analysis against finding strong associations among modes of compensation, labor policies, and outcomes, we find that in the firms that make more extensive use of group incentive pay employees participate more in decisions, have greater information sharing, trust supervisors more, and report a more positive workplace culture than in other companies. The combination of group incentive pay with policies that empower employees and create a positive workplace culture reduces voluntary turnover and increases employee intent to stay and raises return on equity. Finding these effects in the non-representative “100 Best Companies” sample strengthens the likelihood that the policies have a causal impact on employee well-being and firm performance.
    JEL: J33 J53 J54 J63 M50 M52 M54 P12 P13 P17
    Date: 2012–01
  5. By: Einar Jón Erlingsson (Reykjavik University); Simone Alfarano (Universitat Jaume I); Marco Raberto (DOGE.I, Università di Genova); Hlynur Stefánssonn (Reykjavik University)
    Abstract: In this paper, we analyze the distributional properties of the balance sheets of Icelandic firms by performing an empirical analysis of total assets, profit rates and growth rates using a data set of 2818 Icelandic firms during the period 2000-2009. We find that the firms size measure, i.e. total assets, have the same heavy tail characteristics as various studies have shown, e.g. for U.S. and Italian firms. The heavy tail nature of the total assets distribution seems to be robust w.r.t. a boom-bust cycle of the economy as well as special characteristics of Icelandic firms, e.g. their relatively small size and private ownership. Another important finding is that the profit rates, or return on assets, of Icelandic firms follow a Laplace like distribution similar to U.S. firms. Additionally, we identified deviations from the distributional regularities, namely the power law behavior of firms' size and Laplacian distributions of growth and profit rates, during the booming period of the economy 2005-2007.
    Keywords: Firm size, Profit rates, Growth rates, Power law, Laplace distribution, Icelandic Firms
    JEL: C12 D01 D22
    Date: 2012
  6. By: Erlingsson, Einar Jón; Alfarano, Simone; Raberto, Marco; Stefánsson, Hlynur
    Abstract: In this paper, we analyze the distributional properties of the balance sheets of Icelandic firms by performing an empirical analysis of total assets, profit rates and growth rates using a data set of 2818 Icelandic firms during the period 2000-2009. We find that the firms size measure, i.e. total assets, have the same heavy tail characteristics as various studies have shown, e.g. for U.S. and Italian firms. The heavy tail nature of the total assets distribution seems to be robust w.r.t. a boom-bust cycle of the economy as well as special characteristics of Icelandic firms, e.g. their relatively small size and private ownership. Another important finding is that the profit rates, or return on assets, of Icelandic firms follow a Laplace like distribution similar to U.S. firms. Additionally, we identified deviations from the distributional regularities, namely the power law behavior of firms' size and laplacian distributions of growth and profit rates, during the booming period of the economy 2005-2007.
    Keywords: Firm size; Profit rates; Growth rates; Power law; Laplace distribution; Icelandic firms
    JEL: D21 C12 D01
    Date: 2012–01
  7. By: Berezinets, Irina (St. Petersburg State University); Ilina, Yulia (St. Petersburg State University); Muravyev, Alexander (IZA)
    Abstract: This paper investigates whether and how various characteristics of CEOs and corporate boards are related to the severity of corporate governance problems within firms. The latter is proxied by private benefits of control, which we measure for dual class stock firms using the voting premium approach. Our empirical analysis is based on data from Russia and takes advantage of the extreme corporate governance problems in the country, considerable variation in corporate governance practices across firms and over time, and presence of a large and exogenously created (during the process of privatization) group of dual class stock companies. The data are assembled from the RTS, SKRIN and SPARK databases and include over 200 firms observed in 1997-2009, with over 1000 observations in total. Our econometric analysis suggests a quadratic relationship between private benefits of control and CEO ownership with a minimum at about 4% CEO ownership, a positive association between CEO tenure and private benefits, and a quadratic in CEO age with a dip in private benefits at about 52 years of age. There is also a quadratic relationship between private benefits of control and board size, implying the optimality of medium-sized (about 9-10 directors) boards. We find no gender effects on private benefits of control.
    Keywords: CEO, corporate board, private benefits of control, dual-class stock firms, Russia
    JEL: G34
    Date: 2011–12
  8. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Nabavi, Pardis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper analyzes the relationship between exporters, spin-outs and firm performance. A large body of research has shown that exporters perform better than non-exporters. But are also firms spawn out from exporters better than other new firms in terms of survival, productivity and growth? Using a panel of about 2,000 ex-employee starts ups, their parent companies and 10 000 other new firms in Sweden observed over a sequence of 5 years, we provide new evidence on spinouts as a channel of transferring knowledge from exporting firms to new ventures.
    Keywords: Exports; new firms; spin-out; spillovers; productivity
    JEL: J24 L26 M13 O31 O32
    Date: 2012–01–13
  9. By: Tobias Adrian; Hyun Song Shin
    Abstract: Conventional discussions of balance sheet management by nonfinancial firms take the set of positive net present value (NPV) projects as given, which in turn determines the size of the firm’s assets. The focus is on the composition of equity and debt in funding such assets. In contrast, the balance sheet management of financial intermediaries reveals that it is equity that behaves like the predetermined variable, and the asset size of the bank or financial intermediary is determined by the degree of leverage that is permitted by market conditions. The relative stickiness of equity reveals possible nonpecuniary benefits to bank owners so that they are reluctant to raise new equity, even during boom periods when raising equity is associated with less stigma and, hence, smaller discounts. We explore the empirical evidence for both market-based financial intermediaries such as the Wall Street investment banks, as well as the commercial bank subsidiaries of the large U.S. bank holding companies. We further explore the aggregate consequences of such behavior by the banking sector for the propagation of the financial cycle and securitization.
    Keywords: Assets (Accounting) ; Intermediation (Finance) ; Equity ; Debt
    Date: 2011
  10. By: Bazdresch, Santiago
    Abstract: Firms producing differentiated products have high margins and therefore low risk. As a result firms invest more into developing differentiated products when they perceive risk is high. Higher risk also implies higher product skewness towards more differentiated products and therefore higher average markups. The model predicts endogenous systematic and idiosyncratic riskiness as well as endogenous intensity of competition: firms in high risk industries reduce their riskiness by competing less than firms in low risk industries. Empirical evidence on product differentiation, R\&D expenses, B/M ratios, and market $\beta$ is consistent with the model.
    Keywords: Stock Returns; Price Differentiation; Product Market Competition; Product Development; Idiosyncratic Volatility; Research and Development; Counter-Cyclical Markups; Price of Risk; Price-Cost Margin; Investment; Innovation
    JEL: L25 L16 L11 G12 E32 E22 G32 O31
    Date: 2011–10–01
  11. By: Robert Wagner (Ludwig-Maximilians University, Munich); Thomas Zwick (Ludwig-Maximilians University, Munich and Centre for European Economic Research, Mannheim)
    Abstract: This paper jointly analyses the consequences of adverse selection and signalling on entry wages of skilled employees. It uses German linked employer employee panel data (LIAB) and introduces a measure for relative productivity of skilled job applicants based on apprenticeship wages. It shows that post-apprenticeship employer changers are a negative selection from the training firms’ point of view. Negative selection leads to lower average wages of employer changers in the first skilled job than stayers. Entry wages of employer changers are specifically reduced by high occupation and training firm retention rates. Additional training firm signals are high apprenticeship wages that a positive selection of apprenticeship applicants, works councils and firm size that increase training quality. Finally, positive individual signals such as schooling background affect the skilled entry wages of employer changers positively.
    Keywords: entry wages, employer change, adverse selection, signalling
    JEL: J24 J31 J62 J63 M52 M53
    Date: 2012–01
  12. By: Stefan Schneck
    Abstract: This paper uses unique German data to examine the effects of the relative standing on the individual propensity to become self-employed in the next two years. The results suggest that the relationship between relative wage positions and propensity to become self-employed is U-shaped. This is interpreted as evidence that low status translates into entrepreneurial motivation for workers in low relative wage positions. Employees with high relative standing, in turn, seem to be more concerned about the lack of future career prospects in paid employment and consider self-employment as a next step on the individual career ladder.
    Keywords: Relative wage position, status, self-employment
    JEL: L26 L29
    Date: 2011
  13. By: D'Elia, Enrico
    Abstract: Typically, firms change their size through a row of discrete leaps over time. Sunk costs, regulatory, financial and organizational constraints, talent distribution and other factors may explain this fact. However, firms tend to grow or fall discontinuously even if those inertial factors were removed. For instance, a very essential model of discontinuous growth can be based on a couple of assumptions concerning only technology and entrepreneurs’ strategy, that is: (a) in the short run, the firm’s equipment and organization provide the maximum profit only for a given production level, and diverging form it is costly; and (b) in the long run, the firm adjusts its size as if the current equipment had to be exploited until overall profit exceeds the profit expected from the new desired plant at the current production level. Combining the latter two hypotheses entails a number of testable consequences, usually regarded as nuisance facts within the traditional theoretical framework. First of all, an upper bound constraints both investment and disinvestment. Secondly, the profitability is not a continuous function of the firms’ size, but exhibits a number of peaks, each corresponding to a locally optimal size. Thirdly, firms tend to invest when profit approaches a local minimum, corresponding to the lowest profit claimed by the entrepreneur. Therefore, firm’s level data would prove only weak statistical relationships among profitability, output and investment. Finally, the distribution of firms by growth rate is multimodal since, within each sector, every firm typically adjusts its size through the same sequence of leaps. There are a number of analogies between the firm’s growth process predicted by the model and some physical phenomena explained by the quantum theory.
    Keywords: Capacity utilization; Discontinuity; Firm’s size; Growth; Lumpy investment
    JEL: D21 L11 D92
    Date: 2011–12
  14. By: Lambertini, Luisa (EPFL, College of Management); Mendicino , Caterina (Banco de Portugal, Departamento Estudos Economicos); Punzi , Maria Teresa (University of Nottingham)
    Abstract: Survey data suggests that news of changes in business conditions are significantly related to house prices and consumers' beliefs of favorable buying conditions in the housing market. This paper explores the transmission of "news shocks" as a source of boom-bust cycles in the housing market. News on shocks originated in different sectors of the economy can generate booms in the housing market in accordance with the average behavior in the data; expectations on monetary policy and in inflationary shocks that are not fulfilled can also lead to the observed subsequent macroeconomic recession. Investigating the role of the credit market for house market fluctuations we find that favorable credit conditions that are expected to be reversed in the near future generate boom-bust cycle dynamics in line with the most recent episode. Further, credit conditions also affect boom-bust cycles generated by news shocks originated in other sectors of the economy. In particular, lower loan-to-value ratios reduce the severity of expectations-driven cycles and the volatility of household debt, aggregate consumption and GDP.
    Keywords: boom-bust cycles; credit frictions; housing market
    JEL: E32 E44 E52
    Date: 2012–01–11
  15. By: Jack Favilukis; David Kohn; Sydney C. Ludvigson; Stijn Van Nieuwerburgh
    Abstract: The last fifteen years have been marked by a dramatic boom-bust cycle in real estate prices, accompanied by economically large fluctuations in international capital flows. We argue that changes in international capital flows played, at most, a small role in driving house price movements in this episode and that, instead, the key causal factor was a financial market liberalization and its subsequent reversal. Using observations on credit standards, capital flows, and interest rates, we find that a bank survey measure of credit supply, by itself, explains 53 percent of the quarterly variation in house price growth in the U.S. over the period 1992-2010, while it explains 66 percent over the period since 2000. By contrast, once we control for credit supply, various measures of capital flows, real interest rates, and aggregate activity—collectively—add less than 5% to the fraction of variation explained for these same movements in home values. Credit supply retains its strong marginal explanatory power for house price movements over the period 2002-2010 in a panel of international data, while capital flows have no explanatory power.
    JEL: F20 F32 G12 G21
    Date: 2012–01
  16. By: Dustmann, Christian (University College London); Glitz, Albrecht (Universitat Pompeu Fabra)
    Abstract: In this paper, we investigate how changes in the skill mix of local labor supply are absorbed by the economy. We distinguish between three adjustment mechanisms: through factor prices, through an expansion in the size of those production units that use the more abundant skill group more intensively, and through more intensive use of the more abundant skill group within production units. We investigate which of these channels is dominant. We contribute to the existing literature by analyzing these adjustments on the level of firms, rather than industries, and by assessing the role of new firms in the absorption process of labor supply shocks. Our analysis is based on administrative data, comprising the entirety of firms in Germany over a 10 years period. We find that, while factor price adjustments are important in the non-tradable sector, labor supply shocks do not induce factor price changes in the tradable sector. In this sector, most of the adjustment to changes in relative factor supplies takes place within firms by changing relative factor intensities. Given the non-response of factor prices, this finding points towards changes in production technology. Our results further show, that firms that enter and exit the market are an important additional channel of adjustment. Finally, we demonstrate that an industry level analysis is likely to over-emphasize technology-based adjustments.
    Keywords: immigration, endogenous technological change, firm structure
    JEL: F1 J2 J61 L2 O3
    Date: 2011–12
  17. By: Lilia Karnizova (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: Overly optimistic expectations concerning productivity and consequent downward revisions are commonly viewed as a key determinant of U.S. investment during the boom-bust cycle of 1995–2003. This view is formalized and evaluated in a general equilibrium model with news shocks about future productivity and preferences for financial wealth. The model generates a boom-bust cycle in response to good news that is not realized. A method is devised to estimate “the productivity prospects”: a series that captures the effects of news shocks on economic decisions. The estimated series rises during the boom, falls during the recession and helps forecast future productivity shocks at several horizons. The model's predictions for sample paths of hours worked, output, investment, consumption, wages and stock prices are largely in conformity with U.S. data. The model therefore offers a possible solution to several puzzles identified in the literature regarding the 1990's boom and the 2001 recession.
    Keywords: boom-bust cycles; news shocks; investment; expectations; preferences for wealth
    JEL: E21 E22 E27 E32
    Date: 2012
  18. By: D'Elia, Enrico; Nascia, Leopoldo; Zeli, Alessandro
    Abstract: Typically, firms change their size through a row of discrete leaps over time. A very basic model allowing for discontinuous growth can be based on a couple of assumptions: (a) in the short run, the firm’s equipment and organization provide the maximum profit only for a given production level, and diverging form it is costly; and (b) in the long run, the firm adjusts its size as if the current equipment had to be exploited until overall profits exceed a given threshold and those expected from the new desired plant for the current production level. Combining the latter two hypotheses entails a number of testable consequences, usually regarded as nuisance facts according to the traditional theories. First of all, the profitability should not be a continuous function of the firms’ size, but exhibits a number of peaks, each corresponding to a different locally optimal size. Secondly, when demand is growing, investment are expected to increase just when profits falls shorter some given threshold. The model has been tested by using a panel of data on the size and performances of Italian manufacturing firms from 1998 to 2007. Indeed, both the non-parametric analysis and a panel estimation confirm the presence of several “peaks” in the distribution of profitability by size. Furthermore, a negative statistical relationship is apparent between investment and profitability, controlling for the size of firms.
    Keywords: Capacity utilization; Discontinuity; Firm’s size; Growth; Investment; Non parametric smoothing; Panel regression; Profit function
    JEL: D21 L11 D92
    Date: 2011–11
  19. By: Balázs Égert; Douglas Sutherland
    Abstract: This paper takes a fresh look at the nature of financial and real business cycles in OECD countries using annual data series and shorter quarterly and monthly economic indicators. It first analyses the main characteristics of the cycle, including the length, amplitude, asymmetry and changes of these parameters during expansions and contractions. It then studies the degree of economic and financial cycle synchronisation between OECD countries but also of economic and financial variables within a given country, and gauges the extent to which cycle synchronisation changed over time. Finally, the paper provides some new evidence on the drivers of the great moderation and analyses the banking sector’s pro-cyclicality by using aggregate and bank-level data. The main findings show that the amplitude of the real business cycle was becoming smaller during the great moderation, but asset price cycles were becoming more volatile. In part this was linked to developments in the banking sector which tended to accentuate pro-cyclical behaviour.<P>Cycles économiques et financiers : la grande modération et la pro-cyclicalité du secteur bancaire<BR>Ce papier analyse la nature des cycles économiques et financiers dans les pays de l'OCDE en utilisant des séries annuelles, trimestrielles et mensuelles. Il analyse d'abord les principales caractéristiques du cycle, y compris la durée, l'amplitude, l'asymétrie et les changements de ces paramètres au cours des expansions et contractions. Il étudie ensuite le degré de synchronisation des cycles économiques et financiers entre les pays de l'OCDE, mais aussi des variables économiques et financières dans un pays donné, et évalue dans quelle mesure la synchronisation des cycles a changé au fil du temps. Enfin, le papier fournit quelques éléments nouveaux sur les facteurs de la grande modération et étudie la pro-cyclicité du secteur bancaire en utilisant des données agrégées et des banques individuelles. Les principaux résultats montrent que l'amplitude du cycle réel diminuait durant la grande modération, mais les cycles des prix des actifs ont été de plus en plus volatiles. Cela était en partie liée à l'évolution du secteur bancaire qui avait tendance à accentuer le comportement pro-cyclique.
    Keywords: financial markets, banking system, real business cycles, financial cycles, great moderation, marchés financiers, système bancaire, cycles économiques, cycles financiers, grande modération
    JEL: E32 E44
    Date: 2012–01–09
  20. By: Michele Ca' Zorzi; Alexander Chudik; Alistair Dieppe
    Abstract: The global financial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any firm conclusion. We explore three alternative econometric strategies: examining all models, selecting a few, and combining them all. Out of thousands (or indeed millions) of models a story emerges. The chance that current accounts were aligned with fundamentals prior to the financial crisis appears to be minimal.
    Keywords: Macroeconomics - Econometric models
    Date: 2011
  21. By: Sergio Currarini (Department of Economics,Faculty of Economics, Università degli Studi di Venezia "Ca' Foscari"); Marco Marini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo" and CREI, Università di Roma III)
    Abstract: In this paper we review a number of coalitional solution concepts for the analysis of the stability of cartels and mergers under oligopoly. We show that, although so far the industrial organization and the cooperative game-theoretic literature have proceeded somehow independently on this topic, the two approaches are highly inter-connected. We first consider the basic problem of the stability of the whole industry association of firms under oligopoly and, for this purpose, we introduce the concept of core in games with externalities. We show that different assumptions on the behaviour as well as on the timing of the coalitions of firms yield very di¤erent results on the set of allocations which are core-stable. We then consider the stability of associations of firms organized in coalition structures different from the grand coalition. To this end, various coalition formation games recently introduced by the so called endogenous coalition formation literature are critically reviewed. Again, di¤erent assumptions concerning the timing and the behaviout of firms are shown to yield a wide range of different results.
    Keywords: Cooperative Games, Coalitions, Mergers, Cartels, Core, Games with Externalities, Endogenous Coalition Formation.
    JEL: C70 C71 D23 D43
    Date: 2011
  22. By: Jacques Brook (Maastricht School of Management, the Netherlands)
    Abstract: The competitive advantage literature has tended to establish a strong relation between innovation leadership and high firm performance. However, we found that this is not always true. Inspired by the failure of many firms to be leaders in innovation, many other firms prefer to orient their corporate innovation strategy towards being a smart follower. Here their objective is to reduce the risks of innovations and to achieve a sustained competitive advantage. Smart followers move beyond the traditional notion of follower that focuses on the decision of not becoming a leader in particular technology domain and how to gain a cost advantage by learning from the leader. This paper discusses an institutional innovation framework based on a business system thinking approach. The objective is to assist the leadership in firms in synergizing capabilities in the interactions between the innovation dimensions. We found that firms that choose to be smart followers can become top performer if they pursue institutional innovation.
    Keywords: Innovation Strategy, Institutional Innovation, Competitive advantage, Business model innovation, technology innovation, process innovation, service and product innovation, social and sustainable innovation, performance.
    JEL: M12 M14
    Date: 2011–10
  23. By: Mirella Damiani; Andrea Ricci
    Abstract: Purpose: This paper examines two institutional aspects closely related: (i) the extent to which collective bargaining has been decentralized at firm or district level; (ii) the extent to which, at this level of bargaining, Performance Related Pay (PRP) have been used. Design/methodology/approach: On the basis of a unique database, which contains recent information on nationwide sample of firms, panel estimates aimed at identifying the main factors which have favoured the adoption of the second level of bargaining and PRP are presented. Findings. unions, after size, is the main factor associated to the probability of the second level of bargaining and PRP. Significant estimates are also found for training. Research limitations/implications – Further research based on additional data should enable us to identify causal effects. Practical implications: It offers new evidence to evaluate ongoing reform proposals to implement firm-level agreements more tailored to firms’ specific needs. Originality/value our estimates are based on a unique dataset which contains recent information and a nationwide sample of firms, representative of the whole Italian economy (other studies on Italy are more limited in scope, since they focus on specific sectors or regions). Second, it addresses the question of training, an aspect so far not examined in relation to PRP in Italy.
    Keywords: Performance–related pay, unions
    JEL: J33 J51
    Date: 2011–11–01
  24. By: S. Sheng (School of Business - Adelphi University); Y. Bao (College of Business Administration - The Hong Kong Polytechnic University); L. Lessassy (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II, UPMF Grenoble II - Université Pierre Mendès France - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique); K. H. Lai (Depatment of logistics and maritime studies - The Hong Kong Polytechnic University); T. Leung (Department of Management and Marketing - The Hong Kong Polytechnic University); Christina Wong (the Hong Kong Polytechnic University - Institute of Textiles and Clothing)
    Abstract: Purpose - This paper aims to advance buyer-supplier relationship management research by integrating transaction cost economics, social exchange theory, and institutional theory. The specific purpose is to identify the determinants of relational adaptation in the service relationship. Design/methodology/approach - This study used a field survey to collect data. It used structural equation modeling for data analyses. It collected data from the population of supplier organizations of a focal firm, which is an international container port terminal operator. Findings - We find that that transaction specific investment, business uncertainty, trust, and social respect are positively related to a supplier's relational adaptation. Research limitations/implications - this research provides a synthesis of effects of exchange hazards, relational norms, and legitimacy to explain a supplier's adaptation behaviors. Practical implications - Our study has several managerial implications that are helpful for firms to elicit adaptation from their partner firms. First, specific investment can be useful to serve as an interfirm governance mechanism to attain relational adaptation. Second, the development of trust and social respect in customer relationship is important for firms to attain relational adaptation. Originality/value - The novelty of this paper lies in an integrative synthesis of transaction cost economics, social exchange theory, and institutional theory. Based on three different mechanisms, we provide a holistic explanation for relational adaptation behaviors in buy-supplier relationship.
    Keywords: relational adaptation, buyer-supplier relationship, transaction specific investment, business uncertainty, trust, social respect
    Date: 2011
  25. By: Lama, Ruy (International Monetary Fund); Urrutia, Carlos (Centro de Investigación Económica, ITAM)
    Abstract: We build a small open economy, real business cycle model with labor market frictions to evaluate the role of employment protection in shaping business cycles in emerging economies. The model features matching frictions and an endogenous selection effect by which inefficient jobs are destroyed in recessions. In a quantitative version of the model calibrated to the Mexican economy we find that reducing separation costs to a level consistent with developed economies would reduce output volatility by 15 percent. We also use the model to analyze the Mexican crisis episode of 2008 and conclude that an economy with lower separation costs would have experienced a smaller drop in output and in measured total factor productivity with no significant change in aggregate employment.
    Date: 2012–01
  26. By: Marco Nicolosi; Stefano Grassi; Elena Stanghellini
    Abstract: Compliance with Corporate Social Responsibility (CSR) standards may require capacity that varies from one aspect to the other and companies in different industries may encounter different difficulties. Since CSR is a multidimensional concept, latent variable models may be usefully employed to provide a unidimensional measure of the ability of a firm to fulfil CSR standards. A methodology based on Item Response Theory has been implemented on the KLD sustainability dataset. Results show that companies in the industries Oil & Gas, Industrials, Basic Materials and Telecommunications have a higher difficulty to meet the CSR standards. Criteria based on Environment, Community relations and Product quality have a large capacity to select the firms with the best CSR performance, while Governance does not exhibit similar behavior. A stock selection based on the ranking of the firms according to our CSR measure outperforms, in terms of risk-adjusted returns, stock selection based on other criteria.
    Keywords: Socially Responsible Investment, CSR ability, latent variable model, item response theory
    JEL: C43 G11 G14 G19
    Date: 2011–10–15
  27. By: Jan Babecky; Kamil Galuscak; Lubomir Lizal
    Abstract: Using a large panel of Czech manufacturing firms with 50 or more employees, we update the firm-level labour demand elasticity estimates for 2002-2009. The economic crisis of 2008-2009 provides a source of variation needed for getting estimates that cover not only times of growth, but also a period of economic contraction. We find that in normal times (until 2007), the short-term elasticity is -0.53 with respect to wages and 0.43 with respect to sales, while the long-term elasticities are close to or below unity, standing at -0.94 for wages and 0.76 for sales. Both the wage and sales elasticities increased during the crisis, suggesting that firms became demand constrained, but only the sales elasticity is significantly different. The long-term wage elasticity close to -1 in the period before and during the crisis suggests that firms’ employment decisions are made within fixed budgets. Finally, we find that the inclusion of workers hired through temporary work agencies does not significantly affect the results, indicating that firms take into account total labour when deciding on employment and that hired workers are used as an equal labour demand channel with lower adjustment costs. As a robustness check, our results are qualitatively comparable with the narrative evidence from an ad-hoc firm-level survey on wage and price formation conducted in 2007 and 2009 within the ESCB Wage Dynamics Network.
    Keywords: Czech Republic, elasticity, firm-level data, labour demand, sales elasticity, wage elasticity, the crisis of 2008-2009.
    JEL: C23 J23 J33 P23
    Date: 2011–12
  28. By: Yoshiro Miwa (Faculty of Economics, University of Tokyo)
    Abstract: The Ministry of Finance's "Corporate Enterprise Quarterly Statistics" (Hojin kigyo tokei kiho) is the only statistical source of well-balanced information about the financing behavior of Japanese firms. Indeed, there are few comparable sources available anywhere in the world. Using this firm-level data set from 1994 to 2009, I investigate the financing behavior of Japanese firms with over \10 million in paid-in capital. The conclusions contrast sharply with the conventional wisdom. Much of the research and policy discussions about Japanese finance begin from the premise that banks play a decisive role in firm behavior. This paper shows that firms have maintained a dependence on financial institutions well below the level that the conventional wisdom has claimed. Under the recent "zero-interest-rate, quantity easing" monetary policy, this "independence of the firms from the banks" has increased further. This tendency is clearest among the smaller firms. In turn, this first conclusion raises doubts about the plausibility of the basic premise of research and policy debate on financial issues, and leads us to question whether observers may not have confused a "crisis of financial institutions" with a "financial crisis". Investigation into firm financing behavior under the "financial crisis" from the end of 1997 to the beginning of 1999 does indeed suggest that it was a fiasco caused by the confusion of a "crisis of financial institutions" with a "financial crisis".
    Date: 2011–07
  29. By: Wenjun Liu (College of Economics and Management, Univ. of South China, China); Shoji Nishijima (Research Institute for Economics and Business Administration, Kobe University, Nada-ku, Kobe, Japan)
    Abstract: This study investigates the productivity of Brazilian manufacturing industries, particularly addressing the influence of liberalization on productivity. We first calculate total factor productivity (TFP) by estimating the stochastic frontier production function and the inefficiency determination equation simultaneously. Then TFP growth rates are regressed on openness-related variables and other firm characteristics. The results show that firm openness to the world is a crucial determinant of their productivity. Data used for this study were obtained from the Investment Climate Survey, provided by the World Bank.
    Keywords: TFP, liberalization, Brazil, stochastic frontier analysis
    JEL: D22 O12 O54
    Date: 2012–01
  30. By: Béatrice Parguel (IRG - Institut de Recherche en Gestion - Université Paris XII - Paris Est Créteil Val-de-Marne - Université Paris XII - Paris Est Créteil Val-de-Marne); Florence Benoît-Moreau (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: This paper aims at understanding whether firms should engage in CSR communications towards consumers, or let independent third parties do so. A generalisable sample of 275 adults participated in an experiment, manipulating third-parties credible information (positive information, negative, or absence of information) and company communication (generic vs. CSR communication). Results show a systematic positive effect of CSR communication on corporate brand attitude, even when negative third-parties information is available. CSR communication appears as an efficient and un-risky strategy. Results are further developed and discussed.
    Keywords: CSR communication ; corporate brand attitude ; greenwahsing ; third-parties ; experiment
    Date: 2011

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