|
on Business Economics |
| By: | Xavier Giroud; Holger M. Mueller |
| Abstract: | We document how a plant-specific shock to investment opportunities at one plant of a firm ("treated plant") spills over to other plants of the same firm--but only if the firm is financially constrained. While the shock triggers an increase in investment and employment at the treated plant, this increase is offset by a decrease at other plants of the same magnitude, consistent with headquarters channeling scarce resources away from other plants and toward the treated plant. As a result of the resource reallocation, aggregate firm-wide productivity increases, suggesting that the reallocation is beneficial for the firm as a whole. We also show that--in order to provide the treated plant with scarce resources--headquarters does not uniformly "tax" all of the firm's other plants in the same way: It is more likely to take away resources from plants that are less productive, are not part of the firm's core industries, and are located far away from headquarters. We do not find any evidence of investment or employment spillovers at financially unconstrained firms. |
| JEL: | D24 G3 J63 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18592&r=bec |
| By: | Nakano, Makoto; Nguyen, Pascal |
| Abstract: | We analyze the role of board age on firm performance using a large sample of Japanese firms. The results reveal the existence of a significant negative relationship. After controlling for endogeneity using firm size as instrument, the effect of board age is found to be more significant, consistent with the notion that older directors are more likely to retain (relinquish) their positions in strongly (poorly) performing firms. In addition, we show that the performance of younger and high-growth firms is more sensitive to board age, which points to a risk-based explanation. Indeed, it appears that older boards are more reluctant to take risks and particularly to undertake acquisitions. Overall, the results underline the disadvantage of (re)appointing older managers since the latter tend to be more conservative, perhaps because of their shorter decision horizons or greater vested interests. |
| Keywords: | board of directors, top management, decision making, risk aversion, performance |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hcfrwp:2&r=bec |
| By: | Giorgio Barba Navaretti (University of Milan and Centro Studi Luca d’Agliano); Davide Castellani (University of Perugia and Centro Studi Luca d’Agliano); Fabio Pieri (Universitat de València) |
| Abstract: | This paper provides new insights on the firm age and growth nexus along the entire distribution of (positive and negative) growth rates. Using data from the EFIGE survey, and adopting a quantile regression approach we uncover evidence for a sample of French, Italian and Spanish manufacturing firms in the period from 2001 to 2008. After controlling for several firms’ characteristics, country and sector specificities we find that: (i) young firms grow faster than old firms, especially in the highest growth quintiles (ii) young firms face the same probability of declining than their older counterparts; (iii) high growth is associated with younger CEOs and other attributes which capture the attitude of firm toward growth and change, i.e. the number of employees involved in R&D activities and the number of graduate employees; (iv) results are robust to the inclusion of other firms’ characteristics like labor productivity, capital intensity, and the financial structure. Overall, our results are consistent with several theoretical arguments, like love for risk and learning. |
| Keywords: | firm growth, age, quantile regression |
| JEL: | L21 L25 L26 L60 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1217&r=bec |
| By: | Subhash Ray (University of Connecticut) |
| Abstract: | Firms within a state, states within a country, and countries across the world are continuously striving to enhance their competitiveness in the present age of globalization. This paper defines competitiveness of a production unit as the relative cost of production per unit of output. Basic concepts from neoclassical production economics are used to provide a detailed decomposition of cost competitiveness of a firm relative to a rival. It is also shown how changes in efficiency and relative input prices along with technical change affect the evolution of cost competitiveness of a firm over time. State level data from the U.S. Census of Manufacturers from the years 1992, 1997, 2002, and 2007 are used in a empirical application of the proposed methodology using Data Envelopment Analysis. JEL Classification: C61, L25, O14 Key words: Data Envelopment Analysis, Cost Efficiency, Technical Change |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2012-39&r=bec |
| By: | Kim, Younjun; Orazem, Peter |
| Abstract: | The availability of broadband Internet service should have increased firm productivity and lowered firm entry costs. However, validating the broadband effect is complicated by the rapid deployment of broadband Internet service across metropolitan areas, removing meaningful variation in broadband availability. Deployment in rural markets was much more uneven, suggesting that the presence or absence of broadband service may have altered the site selection of firms targeting rural markets. We investigate the effect of broadband availability on firm location decision in rural Iowa. We establish a counterfactual baseline firm entry rate for each zip code area in rural counties by showing how the presence of broadband service in a ZIP code in 2001 affected firm entry in 1990-1992 before Broadband was available. We then measure how the actual presence of broadband service in the same ZIP code affected firm entry in 2000-2002. We show that the difference in estimated probability of entry between the counterfactual baseline and the actual response ten years later is the Difference-in-Differences estimate of the effect of broadband deployment on firm start-ups. We find that broadband availability in a rural ZIP code has a positive and significant effect on firm entry in the ZIP code but only in rural markets adjacent to a metropolitan area or with a larger urban population. Broadband access does not affect new firm entry in more remote rural markets |
| Keywords: | Internet; Rural; urban; : broadband; firm entry; metropolitan area |
| JEL: | M13 O33 R11 |
| Date: | 2012–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:35696&r=bec |
| By: | Ciarreta Antuñano, Aitor; García Enríquez, Javier; Gutiérrez Hita, Carlos |
| Abstract: | In a two-stage delegation game model with Nash bargaining between a manager and an owner, an equivalence result is found between this game and Fershtman and Judd's strategic delegation game (Fershtman and Judd, 1987). Interestingly, although both games are equivalent in terms of profits under certain conditions, managers obtain greater rewards in the bargaining game. This results in a redistribution of profits between owners and managers. |
| Keywords: | strategic delegation, bargaining, product substitutability, price |
| JEL: | C72 L13 M54 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ehu:dfaeii:9151&r=bec |
| By: | Dachs, Bernhard; Borowiecki, Marcin; Kinkel, Steffen; Schmall, Thomas Christian |
| Abstract: | We investigate production offshoring – the relocation of production activities to locations abroad – of European firms. The analysis employs data from the European Manufacturing Survey (EMS). Offshoring activity is declining across most countries, sectors, and firm sizes between the periods 2004/06 and 2007/09. Regression analysis reveals that this decline is also significant after controlling for firm characteristics. Long-term data for Germany indicate that this decrease is part of a longer trend which already started in 2003. Despite the general decrease in offshoring, far-shoring to Asia in general and to China in particular has increased. In contrast, near-shoring to EU member states in Middle and Eastern Europe (EU-12) became less attractive. The EU-12, however, is still the most important target region for offshoring activities of European firms. The dominant motive for offshoring is the wish to reduce labour costs. Expected labour cost reductions explain offshoring to the EU-12, Asia and China in particular. Vicinity to customers and market expansion follow as a motive with a wide margin. However, in contrast to the EU-12, where the offshoring decision is solely dominated by potential labour cost savings, offshoring activities to Asia and China are also significantly related to market expansion motives. |
| Keywords: | Offshoring; foreign direct investment; internationalisation; production |
| JEL: | F23 F21 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:42973&r=bec |
| By: | Olena Senyuta; Kresimir Zigic |
| Abstract: | We introduce spillover e¤ect into John Sutton's (1991,1998) concept of endogenous sunk costs. These sunk costs appear in the form of R&D investment into quality in our framework. We show that with spillovers increasing and the effectiveness of investment in raising quality decreas- ing, the Sutton lower bound on concentration for an industry decreases and ultimately collapses to zero when spillovers are large enough and/or effectiveness of investment in raising quality is low enough. In the second part, we allow firms to protect their investment against spillovers We focus on symmetric pure strategy Nash equilibria, where all firms either protect their investment or do not protect at all. Contrary to the result with exogenous spillovers assumed in the first part, in the second part of the paper we show that higher ex ante spillovers and/or lower effectiveness of investment in raising quality may induce firms to protect themselves against spillovers, leading to higher investment in quality, and to more concentrated market structure. Thus, the Sutton's result on the concentration bound is preserved, if we allow firms to manage spillovers via private protection. |
| Keywords: | endogenous sunk costs; knowledge spillovers; R&D, inno- vations; market concentration |
| JEL: | L13 O30 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp472&r=bec |
| By: | Sander Hoogendoorn (University of Amsterdam); Simon C. Parker (University of Western Ontario, Richard Ivey School of Business); Mirjam van Praag (University of Amsterdam) |
| Abstract: | This paper studies the impact of diversity in cognitive ability among members of a team on their performance. We conduct a large field experiment in which teams start up and manage real companies under identical circumstances. Exogenous variation in - otherwise random - team composition is imposed by assigning individuals to teams based on their measured cognitive abilities. The setting is one of business management practices in the longer run where tasks are diverse and involve complex decision-making. We propose a model in which greater ability dispersion generates greater knowledge for a team, but also increases the costs of monitoring necessitated by moral hazard. Consistent with the predictions of our model, we find that team performance as measured in terms of sales, profits and profits per share first increases, and then decreases, with ability dispersion. Teams with a moderate degree of ability dispersion also experience fewer dismissals due to few er shirking members in those teams. |
| Keywords: | Ability dispersion; team performance; field experiment; entrepreneurship; knowledge pooling; moral hazard |
| JEL: | C93 D83 J24 L25 L26 M13 M54 |
| Date: | 2012–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20120130&r=bec |
| By: | ISOGAWA Daiya; NISHIKAWA Kohei; OHASHI Hiroshi |
| Abstract: | This paper evaluates the economic impact of new-to-market product innovation using firm-level data obtained from the Japanese National Innovation Survey. It accounts for possible technological spillovers in innovation activities and examines the extent to which new-to-market product innovation contributes to firm performance. The paper offers several new insights on product innovation. |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:12077&r=bec |
| By: | Pfeifer, Christian (Leuphana University Lueneburg and IZA); Wagner, Joachim (Leuphana University Lueneburg, CESIS) |
| Abstract: | This empirical research note documents the relationship between composition of a firm's workforce (with a special focus on age and gender) and its performance with respect to innovative activities (outlays and employment in research and development (R&D)) for a large representative sample of enterprises from manufacturing industries in Germany using unique newly available data. We find that firms with a higher share of older workers have significantly lower proportions of R&D outlays in total revenues and of R&D employment in total employment, whereas firms with a higher share of female employment seem to be more active in R&D. |
| Keywords: | Ageing; firm performance; gender; Germany; innovation; R&D |
| JEL: | D22 D24 J21 J24 L25 |
| Date: | 2012–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0291&r=bec |
| By: | Kano, Takashi; Nason, James M. |
| Abstract: | We study the implications of internal consumption habit for new Keynesian dynamic stochastic general equilibrium (NKDSGE) models. Bayesian Monte Carlo methods are employed to evaluate NKDSGE model fit. Simulation experiments show that internal consumption habit often improves the ability of NKDSGE models to match the spectra of output and consumption growth. Nonetheless, the fit of NKDSGE models with internal consumption habit is susceptible to the sources of nominal rigidity, to spectra identified by permanent productivity shocks, to the choice of monetary policy rule, and to the frequencies used for evaluation. These vulnerabilities indicate that the specification of NKDSGE models is fragile. |
| Keywords: | Consumption Habit, New Keynesian, Propagation, Monetary Transmission, Posterior Predictive Analysis, Bayesian Monte Carlo |
| JEL: | E10 E20 E32 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:hit:econdp:2012-09&r=bec |