nep-bec New Economics Papers
on Business Economics
Issue of 2012‒11‒17
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Does Labor Diversity Affect Firm Productivity? By Parrotta, Pierpaolo; Pozzoli, Dario; Pytlikova, Mariola
  2. International trade and collective bargaining outcomes : Evidence from German employer-employee data By Felbermayr, Gabriel; Hauptmann, Andreas; Schmerer, Hans-Jörg
  3. Core competencies, matching, and the structure of foreign direct investment: an update By Federico J. Díez; Alan C. Spearot
  4. Clustering and firm performance in project-based industries: The case of the global video game industry, 1972-2007 By Mathijs De Vaan; Ron Boschma; Koen Frenken
  5. The Nexus between Labor Diversity and Firm's Innovation By Parrotta, Pierpaolo; Pozzoli, Dario; Pytlikova, Mariola
  6. Has globalization increased the synchronicity of international business cycles? By Berge, Travis
  7. Irish firms’ productivity and Imported Inputs By Emanuele Forlani
  8. Does Wage Rigidity Make Firms Riskier? Evidence from Long-Horizon Return Predictability By Favilukis, Jack; Lin, Xiaoji
  9. Are real entry wages rigid over the business cycle? : Empirical evidence for Germany from 1977 to 2009 By Stüber, Heiko
  10. Gone Fishing! Reported Sickness Absenteeism and the Weather By Jingye Shi; Mikal Skuterud
  11. Intangible assets dynamics and firm behaviour By A. Arrighetti; F. Landini; A. Lasagni
  12. Ambitious entrepreneurship: antecedents and consequences By Julie Hermans; Marcus Dejardin; Johanna Vanderstraeten; Dendi Ramdani; Erik Stam; Arjen van Witteloostuijn
  13. Foreign firms and the diffusion of knowledge By Alexander Monge-Naranjo

  1. By: Parrotta, Pierpaolo (Aarhus School of Business); Pozzoli, Dario (Aarhus University); Pytlikova, Mariola (Aarhus School of Business)
    Abstract: Using a matched employer-employee data-set, we analyze how workforce diversity in terms of cultural background, education and demographic characteristics affects the productivity of firms in Denmark. Implementing a structural estimation of the firms' production function (Ackerberg et al. 2006), we find that labor diversity in education significantly enhances a firm's value added. Conversely, diversity in ethnicity and demographics induces negative effects on firm productivity. Therefore, the negative effects, which are derived from the communication and integration costs associated with a more culturally and demographically diverse workforce, seem to outweigh the positive effects of creativity and knowledge spillovers.
    Keywords: labor diversity, skill complementarity, communication barriers, total factor productivity
    JEL: J15 J16 J24 J61 J81 L20
    Date: 2012–10
  2. By: Felbermayr, Gabriel; Hauptmann, Andreas (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Schmerer, Hans-Jörg (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "In theoretical trade models with variable markups and collective wage bargaining, export exposure may reduce the exporter wage premium. We test this prediction using linked German employer-employee data from 1996 to 2007. To separate the rent-sharing mechanism from assortative matching, we exploit individual worker information to construct profitability measures that are free of skill composition. We find that rent-sharing is less pronounced in more export intensive firms or in more open industries. The exporter wage premium is highest for low productivity firms. In line with theory, these findings are unique to the subsample of plants covered by collective bargaining." (Author's abstract, IAB-Doku) ((en))
    Keywords: Außenhandel - Auswirkungen, Tarifverhandlungen, Export, Einkommenseffekte, Gewerkschaftspolitik, Gewinnbeteiligung, produzierendes Gewerbe, IAB-Linked-Employer-Employee-Datensatz
    JEL: F16 J51 E24 J3
    Date: 2012–03–20
  3. By: Federico J. Díez; Alan C. Spearot
    Abstract: We develop a matching model of foreign direct investment to study how multinational firms choose between greenfield investment, acquisitions, and joint ownership. Firms must invest in a continuum of tasks to bring a product to market. Each firm possesses a core competency in the task space, but the firms are otherwise identical. For acquisitions and joint ownership, a multinational enterprise (MNE) must match with a local partner that may provide complementary expertise within the task space. However, under joint ownership, investment in tasks is shared by multiple owners and hence is subject to a holdup problem that varies with contract intensity. In equilibrium, ex ante identical multinationals enter the local matching market, and ex post, three different types of heterogeneous firms arise. Specifically, the worst matches are forgone and the MNEs invest greenfield; the middle matches operate under joint ownership; and the best matches integrate via full acquisition. We link the firm-level model to cross-country and industry predictions related to development and contract intensity, respectively, where greater contract intensity and a relatively more developed target market yield a higher share of full acquisitions. Using data on partial and full acquisitions across industries and countries, we find robust support for both predictions.
    Keywords: Investments, Foreign ; International business enterprises
    Date: 2012
  4. By: Mathijs De Vaan; Ron Boschma; Koen Frenken
    Abstract: Explanations of spatial clustering based on localization externalities are being questioned by recent empirical evidence showing that firms in clusters do not outperform firms outside clusters. We propose that these findings may be driven by the particularities of the industrial settings chosen in these studies. We argue that in project-based industries, negative localization externalities associated with competition grow proportionally with cluster size, while positive localization externalities increase more than proportionally related to cluster size. By studying the survival patterns of 4,607 firms and 1,229 subsidiaries in the global video game industry, we find that the net effect of clustering becomes positive after a cluster reaches a critical size. We further unravel the subtleties of the video game industry by differentiating between exits by failure and exit by acquisition, and conclude that being acquired is best considered as a sign of success rather than as a business failure.
    Keywords: localization externalities, survival analysis, acquisition, spinoff, cluster, video game industry
    JEL: L25 R11 R12
    Date: 2012–11
  5. By: Parrotta, Pierpaolo (Aarhus School of Business); Pozzoli, Dario (Aarhus University); Pytlikova, Mariola (Aarhus School of Business)
    Abstract: In this paper we investigate the nexus between firm labor diversity and innovation using a linked employer-employee data from Denmark. Specifically, exploiting information retrieved from this comprehensive database and implementing proper instrumental variable strategies, we are able to identify the contribution of workers' diversity in cultural background, education and demographic characteristics to valuable firm's innovation activity. The latter is measured by: (1) the firm's propensity to apply for a patent, (2) the number of patent applications (intensive margin) and (3) the firm's ability to patent in different technological areas (extensive margin). We find that ethnic diversity plays an important role in propelling firm's innovation outcomes.
    Keywords: labor diversity, ethnic diversity, patenting activity, extensive and intensive margins
    JEL: J15 J16 J24 J61 J82 O32
    Date: 2012–10
  6. By: Berge, Travis
    Abstract: The past 30 years have been witness to an inexorable change in the degree to which economies are connected internationally. At the same time, the 2007-2008 recession was the first ‘global recession’ in decades. This article explores how international trade and cross-border holdings financial assets impact the synchronization of business cycles internationally. The paper begins by producing chronologies of business cycle turning points for a group of 32 major economies covering 40 years of history. With these chronologies in hand, we document the degree of bilateral business cycle synchronization, relating cross-country differences in synchronization to bilateral trade and financial linkages. The analysis confirms that countries with deep trade linkages tend to experience similar business cycle fluctuations. However, we find no such relationship for financial linkages.
    Keywords: Globalization; international business cycle synchronization
    JEL: F4
    Date: 2012–10–01
  7. By: Emanuele Forlani (Department of Economics and Management, University of Pavia)
    Abstract: In this paper, we investigate the empirical relationship between firms’ productivity, and imports of intermediate inputs at plant level. Using a unique dataset for Ireland, we focus our analysis on manufacturing firms by distinguishing for ownership and relative efficiency. Our findings show that an increase in the intensive margin of imports positively affects the efficiency of domestic firms, in particular through the imports of materials. Most importantly, we find heterogeneous responses to variations in import intensity, depending on the initial level of productivity. The more efficient a domestic firm is, and the larger the benefits from importing are. The results are robust to potential endogeneity of imports’ decisions, and to reverse casualty: past efficiency levels are not correlated with current import intensity.
    Keywords: Firms’ Productivity, Inputs, Import
    JEL: F10 F14 D24 L25
    Date: 2012–10
  8. By: Favilukis, Jack (London School of Economics and Political Science); Lin, Xiaoji (OH State University)
    Abstract: We explore the relationship between sticky wages and risk. Like operating leverage, sticky wages are a source of risk for the firm. Firms, industries, or times with especially high or rigid wages are especially risky. If wages are sticky then wage growth should negatively forecast future stock returns because falling wages are associated with even bigger falls in output, and increases in operating leverage. Indeed, we find this to be the case in aggregate data, and in industry data. Furthermore, we find that industries with higher wage rigidity have a more negative relationship between wages and returns.
    JEL: E21 E23 E32 E44 G12
    Date: 2012–10
  9. By: Stüber, Heiko (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "So far little empirical evidence exists on how real wages of newly hired workers react to business cycle conditions. This paper aims at filling this gap for Germany by analyzing the cyclical behavior of real wages of newly hired workers while controlling for 'cyclical upgrading' and 'cyclical downgrading' in employee/employer matches over the cycle. The analysis is undertaken for the 1977 to 2009 period using administrative longitudinal matched employer-employee wage data. I find that an increase in the unemployment rate of one percentage point decreases the real wages of job entries within given firm-jobs by about 1.27 percent. In light of the magnitude of the entry-wage cyclicality it seems that introducing wage rigidity in the Mortensen- Pissarides model in order to amplify realistic volatility of unemployment is not supported by the data. Further I show that the procyclicality of the employment/ population ratio is identical to the procyclicality of real entry wages. This counters the view of many macroeconomists that wages are much less cyclical than employment and unemployment." (Author's abstract, IAB-Doku) ((en))
    Keywords: Reallohn, Lohntheorie, Lohnelastizität, Konjunkturzyklus, Arbeitslosigkeit, Lohnstarrheit
    JEL: E24 J31 E32
    Date: 2012–03–15
  10. By: Jingye Shi (Research Institute of Economics and Management, Southwestern University of Finance and Economics); Mikal Skuterud (Department of Economics, University of Waterloo)
    Abstract: A fundamental challenge in informing employer-employee agency problems is measuring employee shirking activity. We identify the propensity of employees to misreport health in order to exploit favorable weather by linking Canadian weather data and survey data on short-term spells of sickness absenteeism among indoor workers during the non-winter months. The results point to a clear tendency for reported sickness absenteeism to rise with weather quality. Comparing across workers suggests larger marginal weather effects where shirking costs are higher, which we show is consistent with employees' marginal utility of outdoor leisure increasing in the interaction of their health and weather quality.
    JEL: D82 I10 J22
    Date: 2012–08
  11. By: A. Arrighetti; F. Landini; A. Lasagni
    Abstract: We study the adoption of different intangible investment strategies in manufacturing firms. Contrary to most of the previous literature, we find such strategies to be highly differentiated. In particular we identify three types of investment behaviour: high and persistent, low and persistent, discontinuous. Using as a reference the capability-based view of the firm, we define and provide support for a set of hypotheses on the determinants of such behaviours. We obtain the following results: first, absorptive capacity led by R&D expenditures is a key competence in sustaining the adoption of an intangible investment strategy, which may be either persistent or discontinuous; second, the implementation of a persistent intangible investment strategy necessarily requires specific investments in the quality of human resources to be made; third, firms with a greater propensity to operate in international markets are more likely to adopt a persistent intangible investment strategy than they are to adopt a discontinuous one; fourth, firms that undertake a growth path that is based on highly uncertain demand segments and high organisational flexibility are likely to adopt a discontinuous intangible investment strategy; and five, the historical intangible asset base represents an important constraint on firms’ investment behaviour.
    Keywords: : intangibles, firm behaviour, asset accumulation, organisational capabilities, R&D, investment strategy
    JEL: D22 L21 L25 O32
    Date: 2012
  12. By: Julie Hermans (University of Namur); Marcus Dejardin (University of Namur, Catholic University of Louvain); Johanna Vanderstraeten (University of Antwerp); Dendi Ramdani (University of Namur); Erik Stam (Utrecht University); Arjen van Witteloostuijn (University of Antwerp, University of Tilburg)
    Abstract: In the recent literature on entrepreneurship, a growing body of knowledge recognizes that some entrepreneurs have higher ambitions than others and that these entrepreneurial ambitions are an important antecedent of actual firm success. Consequently, it is not surprising that ambitious entrepreneurship gradually becomes a topic of high interest for policy makers and scholars (e.g., Gundry and Welsch, 2001; Van Gelderen, 2006). Nevertheless, there does not yet exist a clearly defined overview of what is known (and not known) about this topic. Moreover, although authors advocate that the difference between high and low entrepreneurial ambitions should be recognized (Cassar 2007), few studies actually distinguish between ambitious entrepreneurs and their less-ambitious counterparts. In this paper, we address this gap and provide a structured overview of existing literature on ambitious entrepreneurship. Our analysis confirms that ambitious entrepreneurs might be an interesting population for the research community as well as for policy makers and other practitioners. Indeed, it suggests that ambitious entrepreneurs have a specific impact upon the economy and contribute to the quality of entrepreneurial activity. From a conceptual point of view, the review reveals that there is no consensus with regard to the operationalization of ambitious entrepreneurship and growth ambitions in general. As outcomes of this review, we indentify promising paths for future research and we propose the concept of a projecting process to clarify the link between growth attitude, growth intention and growth expectation.
    Keywords: ambition, motivations, growth, entrepreneurship
    JEL: D84 L25 L26 M13
    Date: 2012–11
  13. By: Alexander Monge-Naranjo
    Abstract: This paper constructs a model to examine the impact of foreign firms on a developing Country’s own accumulation of entrepreneurial knowledge. In the model, entrepreneurial skills are built up on the basis of productive ideas that diffuse internally (at the inside of firms) and externally (spillovers.) Openness to foreign firms enhances the aggregate exposure to ideas but also reduces the returns to investing in entrepreneurial skills. When externalities are present, openness can be welfare reducing. However, regardless of the relative importance of externalities, simple quantitative exercises suggest that the gains of openness are positive and can be large.
    Keywords: International business enterprises ; Technology - Economic aspects
    Date: 2012

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