|
on Business Economics |
| By: | Hengjie Ai; Rui Li |
| Abstract: | We present a dynamic general equilibrium model with heterogeneous firms. Owners of firms delegate investment decisions to managers, whose consumption and investment decisions are private information. We solve the optimal contracts and characterize the implied general equilibrium. Our calibrated model has implications on the cross-sectional distribution and time-series dynamics of firms' investment, managers' compensation, and dividend payout policies. Risk sharing requires that managers' equity shares decrease with firm sizes. That, in turn, implies it is harder to prevent private benefit in larger firms, where managers have a lower equity stake under the optimal contract. Consequently, small firms invest more, pay less dividends, and grow faster than large firms. Despite the heterogeneity in firms' decision rules and the failure of Gibrat's law, we show that the size distribution of firms in our model resembles a power law distribution with a slope coefficient about 1.06, as in the data. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2012-01:x:1&r=bec |
| By: | Pfeifer, Christian (Leuphana University Lüneburg); Wagner, Joachim (Leuphana University Lüneburg) |
| Abstract: | This empirical paper documents the relationship between composition of a firm's workforce (with a special focus on age and gender) and its performance (productivity and profitability) for a large representative sample of enterprises from manufacturing industries in Germany. We use unique newly available data that for the first time combine information from the statistics of employees covered by social security that is aggregated at the enterprise level and information from enterprise level surveys performed by the Statistical Offices. Our micro-econometric analysis confirms previous findings of concave age-productivity profiles, which are consistent with human capital theory, and adds a new finding of a rather negative effect of age on firms' profitability, which is consistent with deferred compensation considerations. Moreover, our analysis reveals for the first time that the ceteris paribus lower level of productivity in firms with a higher share of female employees does not go hand in hand with a lower level of profitability in these firms. If anything, profitability is (slightly) higher in firms with a larger share of female employees. This finding might indicate that lower productivity of women is (over)compensated by lower wage costs for women, which might be driven by general labor market discrimination against women. |
| Keywords: | ageing, firm performance, gender, productivity, profitability, Germany |
| JEL: | D22 D24 J21 J24 L25 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6381&r=bec |
| By: | Jos Jansen |
| Abstract: | This paper studies the incentives for production cost disclosure in an asymmetric Cournot oligopoly. Whereas the efficient firm (consumers) prefers information sharing (concealment) when the firms choose accommodating strategies in the product market, the firm (consumers) may prefer information concealment (sharing) when it can exclude its competitors from the market. Hence, the rankings of expected profit and consumer surplus can be reversed if exit of the inefficient firms is possible. Although the efficient firm has stronger incentives to share information when it shares strategically, there remain cases in which the firm conceals information in equilibrium to induce exit. |
| Keywords: | Cournot oligopoly, information disclosure, exit, cost asymmetry, precommitment |
| JEL: | D82 L13 |
| Date: | 2012–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0052&r=bec |
| By: | Fabbri, Francesca; Marin, Dalia |
| Abstract: | The compensation of executive board members in Germany has become a highly controversial topic since Vodafone's hostile takeover of Mannesmann in 2000 and it is again in the spotlight since the outbreak of the financial crisis of 2009. Based on unique panel data evidence of the 500 largest firms in Germany in the period 1977-2009 we test two prominent hypotheses in the literature on executive pay: the manager power hypothesis and the efficient pay hypothesis. We find support for the manager power hypothesis for Germany as executives tend to be rewarded when the sector is doing well rather than the firm they work for. We reject, however, the efficient pay hypothesis as CEO pay and the demand for managers increases in Germany in difficult times when the typical firm size shrinks. We find further that domestic and global competition for managers has contributed to the rise in executive pay in Germany. Lastly, we show that CEOs in the banking sector are provided with incentives for performance and that the great recession of 2009 acted as a disciplining devise on CEO pay in Germany. |
| Keywords: | manager power hypothesis; efficient pay hypothesis; domestic and global competition for managers; CEO pay in banks; CEO pay in the financial crisis |
| JEL: | F23 J3 M12 M52 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12817&r=bec |
| By: | Andries, Petra; Czarnitzki, Dirk |
| Abstract: | It is known that small firms rely mainly on the CEO's individual knowledge for developing innovations. Recent work suggests that this approach is inefficient since it underutilizes other employees' knowledge. We study to which extent using CEOs, managers and non-managerial employees' ideas enhances small firms' innovation performance. A Heckman selection model on 305 small firms shows that not only CEO's and managers', but also non-managerial employees' ideas contribute to innovation performance. However, contributions depend heavily on the individuals' area of expertise and on whether product or process innovation is desired. Our findings enrich the current view on the entrepreneurial team, but also warn against the implementation of one-size-fits-all employee involvement programs in small firms. -- |
| Keywords: | Employee involvement,upper echelon,non-managerial employees,innovation performance,small firms |
| JEL: | M12 O31 O32 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12013&r=bec |
| By: | J. David Brown; Julie L. Hotchkiss; Myriam Quispe-Agnoli |
| Abstract: | Using administrative data from the state of Georgia, this paper finds that on average, among all firms, employing undocumented workers reduces a firm's hazard of exit by 19 percent. However, the impact varies greatly across sectors. In addition, a firm is at a distinct disadvantage if it does not employ undocumented workers but its rivals do. The advantage to employing undocumented workers increases as more firms in the industry do so. In addition, the advantage to a firm from employing undocumented workers decreases with the skill level of the firm's workers, increases with the breadth of a firm's market, and increases with the labor intensity of the firm's production process. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2012-02&r=bec |
| By: | Greco, Giulio |
| Abstract: | In this paper we investigate the impact of corporate governance and ownership structure variables on earnings management in the European oil industry. We used quarterly data and a panel data methodology. The findings show non-linear relationships among institutional investors ownership and governmental ownership with the magnitude of earnings management. For institutional investors ownership we found a positive association within lower levels of ownership (consistently with the short-term transient view of institutional investors shareholding) and a negative association within higher levels of ownership (consistently with the long-term orientation view of institutional investors, playing a monitoring role over the company’s financial performance). For governmental ownership, we found that a positive association within lower levels of ownership, consistently with the incentives for oil companies to avoid closer political scrutiny on the reported results (political costs hypothesis). We found a negative association with earnings management magnitude in firms where governments are the controlling shareholders or a large blockholders. The findings also show that relevant governance variables, such as the proportion of independent directors, the audit committees size and meeting frequency, contribute to constrain earnings management. Overall, the results suggest that key variables related to ownership and governance structures impact on earnings management across different national settings and governance systems. Moreover, the relationship of ownership structures with earnings management appears to be complex and varying at different levels of ownership. This study could have several practical implications. Firstly, accountability and stricter control could be two issues for firms where governments are shareholders that engages in earnings management practices. Secondly, higher participation of institutional investors in the ownership and in the governance may be beneficial may be an effective monitoring device over earnings manipulation. Finally, the homogeneous results could mean that governance practices are more integrated at an European level than the national governance models and codes’ recommendations are. |
| Keywords: | earnings management; ownership structures; corporate governance |
| JEL: | M41 G3 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37198&r=bec |
| By: | Sebastian Nielen (Schumpeter School of Business and Economics University of Wuppertal); Alexander Schiersch (German Institute for Economic Research) |
| Abstract: | A growing proportion of employees are working under fixed-term contracts. This paper empirically analyzes whether this strategy actually improves firm productivity. To this end, a large dataset of German manufacturing firms and various panel data models are used in order to reveal the expected non-linear effect. Thereby the analysis also takes into account distortions that may result from selection into the use of fixed-term employment. The results of the investigation show that there is no significant effect of fixed-term employment on labor productivity when controlling for the selection effect. |
| Keywords: | fixed-term employment, labor productivity, manufacturing |
| JEL: | D24 L23 L60 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:schdps:sdp12004&r=bec |
| By: | Andrew Atkeson; Christian Hellwig; Guillermo Ordonez |
| Abstract: | We study a market with free entry and exit of firms who can produce high-quality output by making a costly but efficient initial unobservable investment. If no learning about this investment occurs, an extreme "lemons problem" develops, no firm invests, and the market shuts down. Learning introduces reputation incentives such that a fraction of entrants do invest. If the market operates with spot prices, simple regulation can enhance the role of reputation to induce investment, thus mitigating the "lemons problem" and improving welfare. |
| JEL: | D21 D82 L15 L51 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17898&r=bec |
| By: | Li, Youping |
| Abstract: | We study third degree price discrimination in intermediate good markets, in which costs of production for the downstream firms are determined by their investment choices. We focus on the effect of the sequence of firm actions and analyze two models with different timing of investments, before or after the upstream monopolist sets the input prices. When investments are determined after the prices are set, an indirect effect of input prices on the derived demand from downstream firms must be taken into account, due to the change of investment incentives. This causes the upstream firm to possibly charge the more efficient downstream firm a lower price, a result contrasting previous findings. Using linear demand and quadratic investment costs, we show that not only the downstream firms but also the upstream monopolist prefers the sequence of play in the latter model, i.e., it benefits from committing to prices before investments are undertaken. A change of timing from the first model to the second constitutes a strict Pareto improvement. |
| Keywords: | price discrimination; intermediate good; investments; timing |
| JEL: | L10 D40 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36746&r=bec |
| By: | Leon Zucchini; Tobias Kretschmer |
| Abstract: | Competitive dynamics research has focused primarily on interactions between dyads of firms. Drawing on the awareness-motivation-capability framework and strategic group theory we extend this by proposing that firms? actions are influenced by perceived competitive pressure resulting from actions by several rivals. We predict that firms? action magnitude is influenced by the total number of rival actions accumulating in the market, and that this effect is moderated by strategic group membership. We test this using data on the German mobile telephony market and find them supported: the magnitude of firm?s actions is influenced by a buildup of actions by multiple rivals, and firms react more strongly to strategically similar rivals. |
| Keywords: | Competitive rivalry ; competitive dynamics ; strategic groups ; mobile |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:12-03&r=bec |
| By: | Thijssens, Thomas Jean Gertrude Ignace (Maastricht University) |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ner:maastr:urn:nbn:nl:ui:27-28272&r=bec |
| By: | Kohei Daido (School of Economics, Kwansei Gakuin University); Ken Tabata (School of Economics, Kwansei Gakuin University) |
| Abstract: | We build a general equilibrium model of monopolistic competition with moral hazard contracting to examine the interactions among skill-biased technological change (SBTC), organizational changes, and skill premium and within-group wage inequality. While the existing literature finds that the increase in the skilled labor ratio induces SBTC and raises the skill premium, we show that SBTC leads to organizational change toward decentralization by delegating authority within firms, which inuences the reward schedule for delegated skilled managers. This organizational change results in the following: (1) the further increase in the skill premium and (2) the rapid expansion of wage inequality among skilled individuals (between skilled workers and skilled managers). Moreover, we find that there are multiple equilibria where the centralized and decentralized organizational modes simultaneously emerge at the intermediate values of the skilled labor ratio. |
| Keywords: | Decentralization, Moral Hazard, Skill-Biased Technological Change, Skill Premium, Within-Group Wage Inequality |
| JEL: | D86 J31 L16 L22 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:84&r=bec |
| By: | Aloña Martiarena |
| Abstract: | This paper examines and tests how the composition of human capital that workers acquire on-the-job determines the decision to found spinoffs and the know-how that entrepreneurs exploit in the new firm. I argue that given the different degree of specialisation in small and large firms, entrepreneurs emerging from small firms transfer knowledge from more diverse aspects of the business and create spinoffs more related to the main activity of the incumbent firm. Workers in large firms, however, benefit from higher returns to human capital that increase their opportunity costs to switch to an occupation that requires a different combination of skills. Since becoming an entrepreneur implies performing multiple tasks and makes part of their specialised skills unutilised, the minimum quality of the business idea at which they are willing to reveal the discovery is higher and, therefore, entrepreneurs emerging from large firms are of highest quality. |
| Keywords: | Spinoffs ; enrepreneurship ; human caital ; on-the-job learning ; firm performance |
| JEL: | L25 L26 J31 J33 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:12-04&r=bec |
| By: | Ross Levine; Luc Laeven; Martin Goetz |
| Abstract: | This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two novel identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduce BHC valuations. These findings are consistent with the view that geographic diversity makes it more difficult for shareholders and creditors to monitor firm executives, allowing corporate insiders to extract larger private benefits from firms. |
| Keywords: | Bank regulations , Banking , Commercial banks , Corporate governance , |
| Date: | 2012–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/50&r=bec |
| By: | Andreas Koch; Jochen Späth; Harald Strotmann |
| Abstract: | While the majority of existing studies on the determinants of post-entry firm growth focus on the role of the founders or on the impact of firm-specific characteristics like size, age or industry affiliation, a possible impact of the characteristics of a start-up’s workforce on post-entry growth has been widely neglected in the literature so far. Based upon a comprehensive panel dataset of establishments in Germany, this paper contributes to fill this gap and examines the role of the initial employment structure with respect to qualification, age, gender and nationality for post-entry employment growth measured both in terms of employees and in terms of full-time equivalents. Moreover, it is analyzed whether the use of flexible work forms like regular part-time and / or marginal employment in the year of foundation affects post-entry growth. Our empirical results confirm that in particular the initial qualification structure of a start-up’s employees matters for post-entry growth. Establishments using flexible work forms show higher post-entry growth with respect to total hours worked, but a significantly lower growth with respect to the number of employees. |
| Keywords: | start-ups, post-entry performance, firm growth, job quality, flexibility, human capital |
| JEL: | J24 L10 L25 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:iaw:iawdip:78&r=bec |
| By: | Ellen R. McGrattan; Edward C. Prescott |
| Abstract: | Prior to the mid-1980s, labor productivity growth was a useful barometer of the U.S. economy’s performance: it was low during economic recessions and high during expansions. Since then, labor productivity has become significantly less procyclical. In the recent recession of 2008–2009, labor productivity actually rose as GDP plummeted. These facts have motivated the development of new business cycle theories because the conventional view is that they are inconsistent with existing business cycle theory. In this paper, we analyze recent events with existing theory and find that the labor productivity puzzle is much less of a puzzle than previously thought. In light of these findings, we argue that policy agendas arising from new untested theories should be disregarded. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:694&r=bec |
| By: | Erasmus K. Kersting (Department of Economics and Statistics, Villanova School of Business, Villanova University) |
| Abstract: | This paper presents a North-South model with differentiated goods being produced in the North. Each differentiated final good requires both management and manufacturing services as inputs, and firms are heterogeneous with regard to their productivity levels in providing these inputs. Moving manufacturing to the South lowers part of a firm's variable costs. Two scenarios, which are interpreted to correspond to vertical FDI and offshoring, are investigated. In both cases there is a minimum level of management productivity required for firms to benefit from relocation of manufacturing to the South. In the case of offshoring, productivity and profit gains are relatively larger for firms with low initial manufacturing productivity. In addition, firms with very high initial productivity in both aspects choose not to offshore due to the presence of fixed costs. The model is subsequently used to examine the implications of changes in economic integration on the type of firms that exit an industry, change production location or keep manufacturing domestically. |
| Keywords: | Firms; Offshoring; Vertical FDI |
| JEL: | F15 F23 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:vil:papers:17&r=bec |
| By: | Schwalje, Wes |
| Abstract: | Through a multicountry, practice-based review of establishment skills surveys, this article identifies conceptual issues with defining and measuring skills gaps. By harmonizing divergent conceptualizations, an operational definition of skills gaps as a situation in which current employees lack the skills to perform their jobs which results in the compromised ability of a firm to meet business objectives is proposed. This operationalization of the concept offers a more complete answer to how firms are impacted by workforce deficiencies in achieving business objectives implying that understanding job proficiency without assessing the organizational context in which workforce skills are deployed towards market objectives is insufficient. By addressing measurement issues, an alternative approach to establishment skills surveys is advanced that can play a more effective role in determining how workforce skills influence achievement of firm business objectives. The open systems model of the firm is used to explain how skills gaps serve as a bottleneck to the overall functioning of the firm and to demonstrate that firm mitigation strategies are subject to managerial perceptions which can influence the effectiveness and level at which strategies are targeted. A typology of the causes of skills gaps is also proposed as a starting point for government intervention. |
| Keywords: | skills formation; skills gaps; skills shortages; establishment skills surveys; workforce development policy; skills gap causes; skills gap impacts; skills gap mitigation |
| JEL: | J24 |
| Date: | 2012–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37192&r=bec |
| By: | Charles T. Carlstrom; Timothy S. Fuerst; Matthias Paustian |
| Abstract: | This paper derives the privately optimal lending contract in the celebrated fi nancial accelerator model of Bernanke, Gertler and Gilchrist (1999). The privately optimal contract includes indexation to the aggregate return on capital and household consumption. Although privately optimal, this contract is not welfare maximizing as it exacerbates fluctuations in real activity. The household’s desire to hedge business cycle risk, leads, via the fi nancial contract, to greater business cycle risk. The welfare cost of the privately optimal contract (when compared to the planner outcome) is quite large. A countercyclical tax on lender profi ts comes close to achieving the planner outcome |
| Keywords: | Contracts ; Financial markets |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1204&r=bec |
| By: | Varela-Irimia, Xosé-Luís |
| Abstract: | This article studies how product introduction decisions relate to profitability and uncertainty in the context of multi-product firms and product differentiation. These two features, common to many modern industries, have not received much attention in the literature as compared to the classical problem of firm entry, even if the determinants of firm and product entry are quite different. The theoretical predictions about the sign of the impact of uncertainty on product entry are not conclusive. Therefore, an econometric model relating firms’ product introduction decisions with profitability and profit uncertainty is proposed. Firm’s estimated profits are obtained from a structural model of product demand and supply, and uncertainty is proxied by profits’ variance. The empirical analysis is carried out using data on the Spanish car industry for the period 1990-2000. The results show a positive relationship between product introduction and profitability, and a negative one with respect to profit variability. Interestingly, the degree of uncertainty appears to be a driving force of entry stronger than profitability, suggesting that the product proliferation process in the Spanish car market may have been mainly a consequence of lower uncertainty rather than the result of having a more profitable market. Keywords: Product introduction, entry, uncertainty, multiproduct firms, automobile JEL codes: L11, L13 |
| Keywords: | Diferenciació de productes, Automòbils Indústria i comerç, 334 - Formes d'organització i cooperació en l'economia, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/181403&r=bec |
| By: | Guido Ascariy; Giorgio Fagiolo; Andrea Roventini |
| Abstract: | Recent empirical findings suggest that macroeconomic variables are seldom normally distributed. For example, the distributions of aggregate output growth-rate time series of many OECD countries are well approximated by symmetric exponential-power (EP) densities, with Laplace fat tails. In this work, we assess whether Real Business Cycle (RBC) and standard medium-scale New-Keynesian (NK) models are able to replicate this statistical regularity. We simulate both models drawing Gaussian- vs Laplace-distributed shocks and we explore the statistical properties of simulated time series. Our results cast doubts on whether RBC and NK models are able to provide a satisfactory representation of the transmission mechanisms linking exogenous shocks to macroeconomic dynamics. |
| Keywords: | Growth-Rate Distributions, Normality, Fat Tails, Time Series, Exponential-Power Distributions, Laplace Distributions, DSGE Models, RBC Models |
| JEL: | C1 E3 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2012-7&r=bec |
| By: | Heli Koski; Mika Pajarinen |
| Abstract: | We use data from 15 508 Finnish companies with 10 or more employees for the years 2003-2008 to explore the relationship between employment growth and three endogenously determined business subsidy types (i.e. employment subsidy, R&D subsidy and the group of other business subsidies). We find a positive contemporary relationship between all business subsidy types and employment growth. In addition, our findings suggest that R&D subsidies further contribute to the firms’ employment for one year after and employment and other subsidies for three years after the reception of subsidies. After that, the differences between the subsidized and non-subsidized firms vanish. We further find in line with previous empirical studies that both product innovation and sales growth from a firm’s old products contribute to the firm’s employment growth. Innovation policy means successfully promoting product innovation should thus produce positive employment effects. Our empirical findings suggest that a positive employment effect of R&D subsidies is rather short-term though, and not likely a result of product innovation generated in the subsidized firms’ R&D projects. |
| Keywords: | Public subsidies ; enterprise policy ; industrial policy ; technology policy ; employment ; growth ; Finland |
| JEL: | J23 L10 L53 O25 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:12-02&r=bec |
| By: | Constantine Manasakis (Department of Political Science, University of Crete); Evangelos Mitrokostas (Department of Economics, University of Portsmouth); Emmanuel Petrakis (Department of Economics, University of Crete) |
| Abstract: | We investigate the impact of alternative certifying institutions on firms’ incentives to engage in costly Corporate Social Responsibility (CSR) activities as well as their relative market and societal implications. We find that the CSR certification standard is the lowest under for-profit private certifiers and the highest under a Non Governmental Organization (NGO), with the standard of a welfare maximizing public certifier lying in between. Yet, regarding industry output, this ranking is reversed. Certification of CSR activities is welfare enhancing for consumers and firms and should be encouraged. Finally, the market and societal outcomes of CSR certification depend crucially on whether certification takes place before or after firms’ CSR activities. |
| Keywords: | Corporate Social Responsibility, Oligopoly, Vertical Differentiation, Certification |
| JEL: | L13 L5 M14 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2012/06&r=bec |
| By: | Iwasaki, Yoko |
| Abstract: | This paper is an overview of the results from a questionnaire survey and subsequent supplementary interviews of Iran's large apparel firms conducted by the author in 2009-2011. Most of the large apparel firms in Iran are based in Tehran and have been in business for some twenty years. They have a solid business with regular customers, but in general have hesitated to expand the size of their firms. Following the relaxation of restrictions on the procurement of raw materials that existed in the 1990s, the results of survey and interviews show that the firms have developed new channels of procurement although they depend to a considerable degree on imported raw materials and machinery. They have managed to maintain their level of output even with the rapid increase in imports since 2000, although the number of firms has decreased. Low-priced Chinese products have basically not been their rivals; instead, the inflow of foreign name-brand products have hit them heavily. |
| Keywords: | Iran, Apparel industry, Industrial management, Large-scale enterprises, Apparel firms, Questionnaire survey, Interview |
| JEL: | L67 M11 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper327&r=bec |
| By: | Blanchard, Pierre; Gaigne, Carl; Mathieu, Claude |
| Abstract: | We study the impact of trade liberalization on the international strategy of firms (to export and/or invest abroad as well as the number of varieties to be produced) when product differentiation is endogenous. By considering product differentiation as a strategic variable, our analysis sheds new light on the impact of trade barriers on the decision to produce abroad and on the choice of product range, in accordance with recent empirical evidence. We show, even though technology exhibits the same productivity for each variety, firms drop some of varieties with trade integration. In addition, our results reveal that, contrary to the standard theoretical literature, the relationship between the decision to export and trade costs is non-linear. When trade costs are relatively high, firms may export and be multi-product. Finally, the choice of producing abroad results from either a prisoner’s dilemma game or a chicken game. |
| Keywords: | Foreign direct investment, exports, multi-product competition, endogenuos differentiation product, trade integration, International Relations/Trade, F12, F23, L11, L25, |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ulavwp:121117&r=bec |
| By: | Leandro D’Aurizio; Livio Romano |
| Abstract: | The purpose of this paper is to study how family firms, compared to widely-held companies, reacted to the 2008 economic crisis in terms of employment adjustments. By using a difference-in-difference approach, we provide empirical evidence that di- vergent paths of adjustment between family and non-family firms exist, with family firms systematically preferring to safeguard workplaces close to the firm's headquarters, compared to other plants. We offer a new theoretical framework consistent with these findings, that we define the social recognition motive, based on the psychological rela- tion linking the family owner with his community of reference. We investigate possible alternative explanations for the results, most of whom can be ruled out in our setting. Finally, we test more directly for the validity of the social recognition theory, finding encouraging results in line with the predictions. |
| Keywords: | Family Firms, Great Recession, Employment, Social Pressure |
| JEL: | C81 D22 J60 M14 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2011/28&r=bec |
| By: | Christiaan Behrens (VU University Amsterdam); Mark Lijesen (VU University Amsterdam); Eric Pels (VU University Amsterdam); Erik Verhoef (VU University Amsterdam) |
| Abstract: | In this article we study patterns of vertical product differentiation in a multi-product monopoly using a random utility model. Prior research shows that applying such a model in a multi-product setting implies symmetric patterns of product differentiation in which all product variants of a single firm have the same characteristics. Assuming that preferences differ across consumers and allowing for unobserved demand heterogeneity, we numerically show the existence of asymmetric, fully differentiated, patterns of vertical product differentiation in which the monopolist maximises profits by setting prices and qualities. In particular, we show that the patterns of vertical product differentiation depend crucially on the level of unobserved demand heterogeneity and the observed dispersion of willingness to pay for quality. Only if unobserved demand heterogeneity is small relative to the observed dispersion, asymmetric, fully differentiated, equilibriums exist. Furthermore, we find in our model that the level of unobserved heterogeneity and the dispersion of willingness to pay for quality do not affect the relative welfare efficiency of the monopolist. |
| Keywords: | Vertical product differentiation; market segmentation; multi-product monopoly; random utility models |
| JEL: | D21 D42 L11 L12 |
| Date: | 2012–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20120023&r=bec |
| By: | Thomas J. Holmes |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmep:11-4&r=bec |
| By: | Choe, Chongwoo; Matsushima, Noriaki |
| Abstract: | The arm's length principle states that the transfer price between two associated enterprises should be the price that would be paid for similar goods in similar circumstances by unrelated parties dealing at arm's length with each other. This paper examines the effect of the arm's length principle on dynamic competition in imperfectly competitive markets. It is shown that the arm's length principle renders tacit collusion more stable. This is true whether firms have exclusive dealings with unrelated parties or compete for the demand from unrelated parties. |
| Keywords: | Transfer price; arm's length principle; tacit collusion; stability of collusion |
| JEL: | M41 L13 L41 D43 |
| Date: | 2011–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37295&r=bec |
| By: | Lee E. Ohanian |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmep:11-1&r=bec |
| By: | Christian Gormsen (Centre d'Economie de la Sorbonne - Paris School of Economics) |
| Abstract: | Buyers are typically unaware of the full set of offers when making a purchase. This paper examines how international trade interacts with this problem of market intransparency. Sellers must communicate their offers through costly advertising, but cannot reach all buyers. Consequently, no market clearing price exists, and sellers randomize over an equilibrium price distribution. Sellers will wish to spread advertisement costs across markets, leading to international trade, which would not take place under complete information. Buyers then receive more offers, leading to lower prices and buyer surplus gains. Sellers in the model are identical, but appear heterogeneous due to their price randomization. If sellers differ slightly, these differences will be greatly magnified. Finally, the model rationalizes very infrequent exporters as firms offering disadvantageous, but profitable, deals to foreign buyers. |
| Keywords: | Advertising, intra-industry trade, firm heterogeneity, price dispersion. |
| JEL: | F12 D83 D43 M37 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:12017&r=bec |
| By: | Claudine Grisard (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine); Vivien Blanchet (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine) |
| Abstract: | Depuis une dizaine d'années, l'entreprise est érigée comme un acteur majeur de la lutte contre la pauvreté. La responsabilité sociale de l'entreprise et les stratégies de la base de la pyramide, le microcrédit et le social business abondent en ce sens : ils soutiennent la complémentarité des objectifs économiques et sociaux, dont le renforcement réciproque engendrerait le cercle vertueux du développement. Cet article étudie une coentreprise motivée par une telle synergie. Fondée par les groupes Danone et Grameen, elle commercialise des yaourts enrichis à destination des populations pauvres du Bangladesh. La complémentarité des objectifs sociaux et économiques doit intervenir tout au long du cycle du produit. En amont, la production emploie la population locale, qui assure également l'approvisionnement en lait. En aval, les yaourts sont vendus par des femmes afin d'augmenter leurs revenus. Enfin, le yaourt est enrichi pour pallier les carences nutritionnelles du régime local. Cette recherche interroge la synergie des pratiques sociales et économiques. Contrairement au discours dominant sur le social business, nous montrons les conflits qui les traversent. Dès lors, nous proposons une interprétation alternative. Elle est fondée sur la complémentarité de deux approches méthodologique : une déconstruction du discours dominant se concentre sur ce qui est dit ; une étude ethnographique, menée en France et au Bangladesh, révèle ce qui n'est pas dit et ce qui aurait pu être dit. L'article est structuré en deux parties qui se répondent l'une l'autre. Dans la première, nous déconstruisons le discours dominant. Nous montrons que sa charpente dialectique soutient une thèse de la fin de l'histoire. Un : le social et l'économique sont posés comme les deux éléments constitutifs d'une même réalité ; opposés l'un à l'autre, il en résulte un dilemme. Deux : le social business est érigé comme la solution à ce dilemme ; il est la troisième voie qui permet la synthèse des contraires. Trois : une nouvelle dichotomie émerge ; d'un côté les impasses d'un passé dépassé, de l'autre le succès du social business ; c'est-à-dire, d'un côté les conflits de l'histoire, de l'autre la fin des conflits et la fin de l'histoire. Dans une seconde partie, nous nous approprions le schème dialectique du discours dominant et reconstruisons un discours alternatif et subversif. Un : nous montrons comment la structure bipolaire du social business conduit à une dichotomie entre les objectifs sociaux et économiques. Deux : nous montrons que ces deux objectifs sont conflictuels. Trois : nous décrivons la manière dont ces contradictions sont apaisées. Cependant, plutôt que de célébrer la synthèse de forces contraires, nous révélons comment le social est récupéré par l'économique. Cet article offre trois contributions principales. Pointant la présence et l'absence de certains concepts, il contribue à la réflexivité du social business. Restituant les conflits entre le social et l'économique, il dénaturalise le discours angélique du social business. Faisant parler les voix silencieuses, il réhabilite la polyphonie de l'organisation. |
| Keywords: | Social business ; déconstruction ; base de la pyramide ; reconstruction ; RSE ; responsabilité sociale de l'entreprise |
| Date: | 2011–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00676063&r=bec |
| By: | Christian Le Bas (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Nicolas Poussing (CEPS/INSTEAD, 3, Avenue de la Fonte, 4364 Esch-sur-Alzette, Luxembourg) |
| Abstract: | This paper examines the persistence of innovation behaviour at the firm level (manufacturing and services sectors). We attempt to answer the question : does being successful in past innovation activities increase the probability of being successful in current innovation activities ? We contribute to the literature by explicitly distinguishing between single and complex innovation strategies. Using two waves of the Community Innovation Survey (2002–2004, 2006–2008) conducted in Luxembourg, the regressions show that complex innovators are more inclined to remain persistent innovators than single innovators. Within the group of single innovators pure product innovators have an advantage over pure process innovators. The results support the idea that the differences in innovation strategies across firms are important for understanding the firm innovation dynamics. |
| Keywords: | Innovation, Persistence, Single and Complex Innovators, CIS |
| JEL: | O31 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1201&r=bec |
| By: | Filippin, Antonio (University of Milan); van Ours, Jan C. (Tilburg University) |
| Abstract: | We use data from the 24-hours Belluno run which has the unique characteristic that participants are affiliated with teams and run for an hour. This allows us not only to study the individual relationship between age and performance but also to study group dynamics in terms of accessions to and separations from teams in a manner that closely resembles workers and firms when individual productivity would have been perfectly observable. From our analysis we conclude that individual performance goes down with age, although the speed-age gradient is rather flat. Group performance goes down with age as well, but interestingly a counterbalancing force emerges, namely team dynamics that are driven by performance of runners who enter and leave. |
| Keywords: | age, performance, attrition |
| JEL: | J14 J24 J31 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6387&r=bec |
| By: | Giorgio Barba Navaretti (University of Milan); Matteo Bugamelli (Bank of Italy); Riccardo Cristadoro (Bank of Italy); Daniela Maggioni (Università Politecnica delle Marche) |
| Abstract: | This paper asks whether and why advanced countries differ in their ability to export to China and India. We exploit a newly collected, comparable cross-country survey of 15,000 European manufacturing firms (EFIGE). The dataset contains information on firms’ international activities and characteristics such as size and productivity, governance and management structure, workforce, innovation and research activity. We identify the firm characteristics that are correlated with exporting activity in general as well as with exporting to China and India conditional on being an exporter. In line with existing literature, we prove that larger, more productive and innovative firms are more likely to become exporters and to export more. Our results also provide new evidence on the role of governance: while there is not a strong negative effect of family ownership, a higher percentage of family management reduces a firm’s export propensity and export volumes. Regarding China and India, we find that firms exporting there are on average larger, more productive and more innovative than firms exporting elsewhere. |
| Keywords: | exports, productivity, firm size, management. |
| JEL: | F1 L2 M2 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_112_12&r=bec |
| By: | Bing Guo; Yun Lou; David Pérez-Castrillo |
| Abstract: | We propose a model of investment, duration, and exit strategies for start-ups backed by venture capital (VC) funds that accounts for the high level of uncertainty, the asymmetry of information between insiders and outsiders, and the discount rate. Our analysis predicts that start-ups backed by corporate VC funds remain for a longer period of time before exiting and receive larger investment amounts than those financed by independent VC funds. Although a longer duration leads to a higher likelihood of an exit through an acquisition, a larger investment increases the probability of an IPO exit. These predictions find strong empirical support. |
| Date: | 2012–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:895.12&r=bec |
| By: | Michele Campolieti (Department of Management, University of Toronto Scarborough); Deborah Gefang (Department of Economics, Lancaster University) |
| Abstract: | VAR methods have been used to model the inter-relationships between infl‡ows and outfl‡ows into unemployment and vacancies using tools such as impulse response analysis. In order to investigate whether such impulse responses change over the course of the business cycle or over time, this paper uses TVP-VARs for US and Canadian data. For the US, we …find interesting differences between the most recent recession and earlier recessions and expansions. In particular, we …find the immediate effect of a negative shock on both infl‡ow and outfl‡ow hazards to be larger in 2008 than in earlier times. Furthermore, the effect of this shock takes longer to decay. For Canada, we …find less evidence of time-variation in impulse responses. |
| Keywords: | unemployment hazards, labor market dynamics, time-varying parameter VAR, sign-restricted impulse responses |
| JEL: | J64 J63 C32 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1138&r=bec |
| By: | Andrew Hughes Hallett (Asian Development Bank Institute (ADBI)); Christian Richter |
| Abstract: | This paper tests the hypothesis that the links and leadership/dependency relationships between the People’s Republic of China (PRC), the United States (US), and the other large Asian economies have changed over the past 20 years with the industrialization of the PRC economy. We use time-varying spectral methods to decompose the links between seven advanced Asian economies and the US. We find : (a) the links with the US have been weakening, while those within a bloc based on the PRC have strengthened; (b) that this is not new—it has been happening since the 1980s, but has been partly reversed by the recent surge in trade; (c) that there are two blocs within the Asian economic area : one based on Japan and the Republic of Korea and the other on the PRC and her satellites; (d) that product composition is responsible for this division (and for some movement between the blocs); and (e) that the links between the PRC and the US are rather complex, with the US able to shape the cycles elsewhere through her control of monetary conditions, but the PRC able to control the size of the cycles at home and (to some extent) abroad. |
| Keywords: | dependency relationships, leadership relationships, the PRC, the US, Trans-Pacific Economic Relation, US-China Business Cycles |
| JEL: | C22 C29 C49 F43 O49 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:23244&r=bec |
| By: | Robert E. Lucas, Jr.; Nancy L. Stokey |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmep:11-3&r=bec |