nep-bec New Economics Papers
on Business Economics
Issue of 2013‒03‒09
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Dynamics of Investment and Firm Performance: Comparative evidence from manufacturing industries By Marco Grazzi; Nadia Jacoby; Tania Treibich
  2. Collusion Among Many Firms: The Disciplinary Power of Targeted Punishment By Catherine Roux; Christian Thöni
  3. Start-up rates, Entrepreneurship Culture and the Business Cycle. Swedish patterns from national and regional data By Andersson, Martin
  4. On the Internationalization of Corporate Boards By Oxelheim, Lars; Gregori, Aleksandra; Randøy, Trond; Thomsen, Steen
  5. Port Privatization in an International Oligopoly By Noriaki Matsushima; Kazuhiro Takauchi
  6. Comparative versus Informative Advertising in Oligopolistic Markets By Maria Alipranti; Evangelos Mitrokostas; Emmanuel Petrakis
  7. Really Uncertain Business Cycles By Nicholas Bloom; Max Floetotto; Nir Jaimovich; Itay Saporta-Eksten; Stephen Terry
  8. The Impact of Competition on Prices with Numerous Firms By Xavier Gabaix; David Laibson; Deyuan Li; Hongyi Li; Sidney Resnick; Casper G. de Vries
  9. Monthly US business cycle indicators: A new multivariate approach based on a band-pass filter By Marczak, Martyna; Gómez, Victor
  10. Learning and Productivity of Swedish Exporting Firms: The importance of Innovation Efforts and the Geography of Innovation By Lööf, Hans; Nabavi, Pardis

  1. By: Marco Grazzi; Nadia Jacoby; Tania Treibich
    Abstract: If the relation between investment and economic growth is well established in the macroeconomic literature, the existence of a similar link at the level of the firm has been challenged by empirical work. This paper investigates the channels linking investment and firm performance in the French and Italian manufacturing industries. It does so by putting forth a novel methodology to identify investment spikes that corrects for size dependence. While maintaining the desired properties of a spike measure, our chosen proxy retrieves the expected relation between investment and firm performance. Ex-ante, more efficient and fast growing firms display a higher probability to invest; in turn, after an investment spike has taken place the group of investing firms shows further gains in performance. Finally, expansionary investment episodes, as proxied by the opening of new plants, have a negative effect on profitability while they are associated with higher sales and employment levels.
    Keywords: Firm heterogeneity, investment spike, industrial dynamics, corporate performance, capital accumulation, technical change
    Date: 2013–02–13
  2. By: Catherine Roux; Christian Thöni
    Abstract: We explore targeted punishment as an explanation for collusion among many firms. In a series of Cournot oligopoly experiments with various numbers of firms, we compare production decisions with and without the possibility to target punishment at specific market participants. We find strong evidence that targeted punishment enables firms to establish and maintain collusion. More so, we find that the collusive effect of targeted punishment is even stronger in markets with more competitors, suggesting a reversal of the conventional wisdom that collusion is easier the fewer the firms.
    Keywords: Cournot oligopoly; Experiments; Collusion; Targeted punishment
    JEL: L13 K21 C91
    Date: 2013–02
  3. By: Andersson, Martin (CIRCLE Lund University, Blekinge Institute of Technology)
    Abstract: It is often claimed that there are locally embedded values and attitudes towards entrepreneurship, exerting a strong influence on the rate and level of entrepreneurial activity in regions. The concept of regional entrepreneurship culture aims to capture such phenomena, and refers in a general sense to the level of social acceptance and encouragement of entrepreneurs and their activities in a region. This paper discusses regional entrepreneurship culture as a source of persistent differences in regional rates of new firm formation, and presents a number of empirical regularities for Sweden to illustrate the empirical relevance of the main arguments. Using data on rates of new firm formation across Swedish regions over time, the paper further explores the association between start-up activity and the business cycle, as well as how the geographic distribution of start-up rates changes during a major economic crisis.
    Keywords: entrepreneurship; start-ups; geography; culture; business cycles; social capital; persistence
    JEL: L26 O18 R11 R12
    Date: 2013–01–10
  4. By: Oxelheim, Lars (Research Institute of Industrial Economics (IFN)); Gregori, Aleksandra (Center for Corporate Governance); Randøy, Trond (University of Agder,); Thomsen, Steen (Center for Corporate Governance)
    Abstract: Despite the global reach of their commercial activities, many multinational firms have proved slow in internationalizing their boards of directors. Based on a panel study of the internationalization of the boards of 347 non-financial firms from the Nordic countries, we find a higher fraction of international board membership in firms with more foreign sales, in firms with more foreign ownership and in firms whose shares are traded on foreign (mostly European) stock exchanges. Moreover, we find international directors and national directors with international experience complementary. The first-mentioned group is found to serve a monitoring role, related to financial internationalization of the firm, whereas the latter category fills an advisory role related to commercial internationalization. Hence, different types of firm internationalization – commercial versus financial – might call for different types of board internationalization.
    Keywords: Internationalization; International directors; International board experience; Board composition; Nomination committee; Corporate governance
    JEL: F23 G30 G34 L22 M16
    Date: 2013–01–22
  5. By: Noriaki Matsushima; Kazuhiro Takauchi
    Abstract: We investigate how port privatization affects port charges, firm profits, and welfare. Our model consists of an international duopoly with two ports and two markets. When the unit transport cost is large, privatization of ports decreases the prices for port usage, although neither government has an incentive to privatize its port. The equilibrium governmental decisions are inconsistent with the desirable outcome if the unit transport cost is not large enough. The smaller countryfs government is more likely to privatize its port, although the larger countryfs government is more likely to nationalize its port to protect its domestic market.
    Date: 2013–02
  6. By: Maria Alipranti (University of Crete); Evangelos Mitrokostas (Department of Economics, University of Crete); Emmanuel Petrakis (Department of Economics, University of Crete, Greece)
    Abstract: The present paper examines endogenously the firms ��incentives to invest in informative and comparative advertising, in an oligopolistic market with horizontally differentiated products where competition take place in quantities. We show that, in equilibrium the fi��rms undertake a mix advertising strategy that combines both informative and comparative advertising investments. We further compare our results over the equilibrium market outcomes and the social welfare obtained under the endogenous advertising con��figuration with the benchmark case, without firms' ��advertising activities, and the cases of mere informative and mere comparative advertising. We demonstrate that the equilibrium market outcomes, as well as, the welfare alter signifi��cantly depending on the type(s) of advertising that fi��rms have available in the market and the degree of the market competition.
    Keywords: Informative Advertising, Comparative Advertising, Oligopoly, Product Differentiation.
    JEL: L13 M37
    Date: 2013–02–13
  7. By: Nicholas Bloom; Max Floetotto; Nir Jaimovich; Itay Saporta-Eksten; Stephen Terry
    Abstract: We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of time-varying uncertainty on the economy in a dynamic stochastic general equilibrium model with heterogeneous firms. We find that reasonably calibrated uncertainty shocks can explain drops and rebounds in GDP of around 3%. Moreover, we show that increased uncertainty alters the relative impact of government policies, making them initially less effective and then subsequently more effective.
    Keywords: uncertainty
    JEL: E3
    Date: 2013–03
  8. By: Xavier Gabaix (NYU Stern, CEPR and NBER); David Laibson (Harvard University and NBER); Deyuan Li (Fudan University); Hongyi Li (University of New South Wales); Sidney Resnick (Cornell University); Casper G. de Vries (Economic Science Institute, Chapman University, Erasmus University Rotterdam, Tinbergen Institute)
    Abstract: We use extreme value theory (EVT) to develop insights about price theory. Our analysis reveals "detail-independent" equilibrium properties that characterize a large family of models. We derive a formula relating equilibrium prices to the level of competition. When the number of firms is large, markups and prices are pinned down by the tail properties of the noise distribution and prices are independent of many other institutional details. The elasticity of the markup with respect to the number of firms is shown to be the EVT tail exponent of the distribution for preference shocks and in most leading cases is relatively insensitive to the number of firms. For example, for the Gaussian case asymptotic markups are proportional to one over the square root of log n, implying a zero asymptotic elasticity of the markup with respect to the number of firms. Thus competition only exerts weak pressure on prices. We also study applications of the model, including endogenizing the level of noise.
    Date: 2013
  9. By: Marczak, Martyna; Gómez, Victor
    Abstract: This article proposes a new multivariate method to construct business cycle indicators. The method is based on a decomposition into trend-cycle and irregular. To derive the cycle, a multivariate band-pass filter is applied to the estimated trend-cycle. The whole procedure is fully model-based. Using a set of monthly and quarterly US time series, two monthly business cycle indicators are obtained for the US. They are represented by the smoothed cycles of real GDP and the industrial production index. Both indicators are able to reproduce previous recessions very well. Series contributing to the construction of both indicators are allowed to be leading, lagging or coincident relative to the business cycle. Their behavior is assessed by means of the phase angle and the mean phase angle after cycle estimation. The proposed multivariate method can serve as an attractive tool for policy making, in particular due to its good forecasting performance and quite simple setting. The model ensures reliable realtime forecasts even though it does not involve elaborate mechanisms that account for, e.g., changes in volatility. --
    Keywords: business cycle,multivariate structural time series model,univariate band-pass filter,forecasts,phase angle
    JEL: E32 E37 C18 C32
    Date: 2013
  10. 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 is concerned with the productivity and growth of Swedish exporting firms. Using data on 9,580 manufacturing firms with 10 or more employees for the period 1997-2008, it estimates a dynamic GMM model that captures both the impact of recurrent knowledge investment through innovation and potential spillovers from the local milieu. The majority of the exporting firms are non-innovative. The data reveal that patent applicants located in knowledge intense milieus account for almost 40 percent of total Swedish exports, but only 2 percent of the firms. From the regressions it is shown that, relative to a firm that does not engage in innovation and has scarce access to external knowledge, the level of productivity is 2-12 percent higher for an innovative firm, depending on how innovation is defined and where the innovator is located. The annual long-run growth rate is 0.2-0.7 higher for innovative firms. Moreover, the performance gap between innovative and non-innovative exporters increases with accessibility to external knowledge for the former.
    Keywords: Productivity; exports; innovation; geographical knowledge spillovers; panel data
    JEL: C23 F14 L25 O31 R32
    Date: 2013–01–17

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