nep-bec New Economics Papers
on Business Economics
Issue of 2013‒05‒11
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Do Multinationals Transplant their Business Model? By Marin, Dalia; Rousova, Linda; Verdier, Thierry
  2. Does size or age of innovative firms affect their growth persistence? Evidence from a panel of innovative Spanish firms By Daria Ciriaci; Pietro Moncada-Paterno-Castello; Peter Voigt
  3. Firm Entry Deregulation, Competition and Returns to Education and Skill By Ana P. Fernandes; Priscila Ferreira; L. Alan Winters
  4. Invest in the best or compensate the weak? An empirical analysis of the heterogeneity of a firm’s provision of human capital By Samuel Muehlemann; Romy Braendli; Stefan C. Wolter
  5. Globalization, occupational restructuring and firm performance By Maliranta, Mika
  6. Legal Reform, Contract Enforcement and Firm Size in Mexico By Sean Dougherty
  7. Do Informal Referrals Lead to Better Matches? Evidence from a FirmÂ’'s Employee Referral System By Giorgio Topa; Elizabeth Setren; Meta Brown
  8. The relationship between slack resources and the performance of entrepreneurial firms: The role of venture capital and angel investors. By T. VANACKER; V. COLLEWAERT; I. PAELEMAN
  9. Interviews and the Assignment of Workers to Jobs By Ronald Wolthoff; Benjamin Lester
  10. Capability-based governance patterns over the product life-cycle By Vermeulen, Ben; Pyka, A.; La Poutré, J. A.; de Kok, A. G.
  11. Which firms train disadvantaged youth? By Jens Mohrenweiser
  12. The effect of employee workplace representation on firm performance. A cross-country comparison within Europe By Van den Berg A.; Grift Y.; Van Witteloostuijn A.; Boone Ch.; Van der Brempt O.

  1. By: Marin, Dalia; Rousova, Linda; Verdier, Thierry
    Abstract: What determines whether or not multinational firms transplant their mode of organisation to other countries? We embed the theory of knowledge hierarchies in an industry equilibrium model of monopolistic competition to examine how the economic environment may affect the decision of a multinational firm about transplanting its business organisation to other countries. We test the theory with original and matched parent and affiliate data on the internal organisation of 660 Austrian and German multinational firms and 2200 of their affiliate firms in Eastern Europe. We find that three factors stand out in promoting the multinational firm’s decision to transplant the business model to the affiliate firm in the host country: a competitive host market, the corporate culture of the multinational firm, and when an innovative technology is transferred to the host country. These factors increase the respective probabilities of organisational transfer by 18.5 percentage points, 37, and 31 percentage points.
    Keywords: organisational economics of multinational firms; trade and organisations; the theory of the firm; organisational transfer between countries
    JEL: D23 F12 F23
    Date: 2013–04
  2. By: Daria Ciriaci (Inter-American Development Bank); Pietro Moncada-Paterno-Castello (JRC-IPTS); Peter Voigt (University of Barcelona)
    Abstract: This study examines serial correlation in employment, sales and innovative sales growth rates in a balanced panel of 3,300 Spanish firms over the years 2002-2009, obtained by matching different waves of the Spanish Encuesta sobre Innovacion en las Empresas, the Spanish innovation survey conducted annually by the Spanish National Statistics Institute (INE). The main objective is to verify whether the changes (increase/decrease) in these figures are persistent over time, whether such persistence (if any) differs between SMEs and larger firms, and if it is affected by a firm's age. To do so, we adopted a semi-parametric quantile regression approach. This methodology is well suited to cases where outliers (high-growth firms) are the subject of investigation and/or when they have to be assumed as being very heterogeneous. Empirical results indicate that among those innovative firms experiencing high employment growth, the smaller and younger grow faster than larger firms, but the jobs they create are not persistent over time. However, while being smaller and younger helps growing more in terms of employment and sales, it is not an advantage when innovative sales growth is considered: in this case larger firms experience faster growth.
    Keywords: Serial correlation; quantile regression model; Spanish firms; firm size, firm age; job creation; fast growing firms.
    JEL: L11 L25
    Date: 2012–09
  3. By: Ana P. Fernandes (University of Exeter); Priscila Ferreira (NIMA, Universidade do Minho); L. Alan Winters (University of Sussex, CEPR, CEP and IZA)
    Abstract: This paper studies the effect of firm entry deregulation on the returns to skill and education. We use matched employer-employee data for the universe of workers and firms in Portugal and exploit a comprehensive episode of entry deregulation, unique in the industrialized world, as a quasi-natural experiment to investigate how increased competition affects wages. We find that after the reform the returns to a university degree increased by around 5 percent and the returns to skills increased by around 3 percent. We include match (worker-firm) fixed effects and thus identify the effect from individuals who stay in the same firm after the reform. Results are therefore not driven by changes in employment composition, and are supportive of education and skill becoming more valuable after the reform.
    Keywords: Entry, Deregulation, Product Market Competition, Wage Structure, Returns to Education
    JEL: J3
    Date: 2013–04
  4. By: Samuel Muehlemann (University of Bern and IZA Bonn); Romy Braendli; Stefan C. Wolter (University of Bern, CESifo & IZA)
    Abstract: The paper aims to test whether a firm’s provision of training depends on the intake quality of trainees. While a firm may just treat each trainee equally, independent of his or her intake quality, firms may alternatively also provide more training to less able individuals or focus on the most able ones. We develop a theoretical framework that illustrates under what circumstances a firm chooses a particular training strategy. We use representative administrative survey data for more than 1400 Swiss establishments. To test our theoretical predictions about a firm’s training strategy, we apply multivariate and instrumental variable (IV) regression models. In addition, we use case study evidence from a large Swiss retailer, allowing us to analyze how different instructors in a specific firm react when confronted with apprentices of different intake qualities. We find that a firm’s training strategy depends on a trainee’s intake quality and the expected net costs of a particular training occupation. Although firms generally provide less training to less qualified trainees, we find that a firm is willing to compensate low-ability trainees with additional training when training is on average profitable in the short run. When training regulations force firms to follow an investment-oriented training strategy (net costs in the short run), then low-ability trainees will not receive additional instruction time and the dropout risk increases. Generating a regulatory framework that allows firms to achieve a net benefit from work-based training is crucial for low-ability trainees to have the opportunity to receive additional training investments that compensate for a lack of competences at the time of the start of training.
    Keywords: Work-based training, heterogeneous trainee ability, apprenticeship training, firm-sponsored training
    JEL: J24 M53
    Date: 2013–05
  5. By: Maliranta, Mika
    Abstract: In this study, the patterns of occupational restructuring and their micro-level mechanisms are examined by applying standard measures of job and worker flows at the occupation and firm levels using longitudinal employeremployee data from the Finnish business sector for the years 2000-2006. Special attention is given to determining how global firms (i.e., multinational enterprises and offshoring firms) contribute to occupational restructuring and to establishing the role of occupational structures when explaining productivity and profitability gaps between global and local firms. The findings indicate that global firms have contributed to reshaping occupational structures, and although this contribution is clearly reflected in their productivity, it is not as clearly reflected in their profitability.The findings imply that employees have captured a dominant share of the productivity advantage of global firms.
    Keywords: globalization, offshoring, occupational restructuring, productivity, profitability
    JEL: J24 F23
    Date: 2013–01–29
  6. By: Sean Dougherty
    Abstract: Legal systems provide the basic institutions for firms and markets to operate. Their quality can have important consequences on the size distribution of firms, who rely on them for contract enforcement. This paper uses the variation in legal system quality across states in Mexico to examine the relationship between judicial quality and firm size. Although the country has a single legal system, its implementation and procedures vary widely, while development outcomes there are more imbalanced and unequal than in any other country of the OECD. The effect of the legal system on inter-state firm efficiency is therefore examined. Building on Laeven and Woodruff (2007), this study uses economic census microdata and contract enforcement ratings to examine the impact of state-level legal institutions on firm and industrylevel outcomes. A robust effect of judicial quality is observed on the firm size distribution and efficiency, instrumenting for underlying historical determinants of institutions. Indicative evidence is found that the effect is strongest in more capital-intensive industries. Market size and distance-to-market are also found to matter for firm size outcomes, consistent with the new trade literature.<P>La réforme juridique, la mise en application des contrats et la taille des entreprises au Mexique<BR>Les systèmes juridiques fournissent les institutions de base pour que les entreprises et les marchés fonctionnent. La qualité du système juridique peut avoir des conséquences importantes sur la distribution de la taille des entreprises. Ces mêmes entreprises comptent sur le système juridique pour la mise en application des contrats. Cet article utilise la variation de la qualité du système juridique dans tous les États du Mexique pour examiner la relation entre la qualité judiciaire et la taille des entreprises. Bien que le pays dispose d’un système juridique unique, sa mise en oeuvre et les procédures varient considérablement, tandis que les résultats de développement y sont plus déséquilibré et inégal que dans n’importe quel autre pays de l'OCDE. L’effet du système juridique sur l’efficacité des entreprises interétatique est donc examiné. S'appuyant sur les travaux de Laeven et Woodruff (2007), cette étude utilise les microdonnées du recensement économique et les notes sur la mise en application des contrats pour examiner l’impact des institutions juridiques étatiques sur l’entreprise et les résultats au niveau de l’industrie. Un effet significatif de la qualité judiciaire est observé sur la distribution de la taille des entreprises et leur efficacité, en instrumentation pour les déterminants sous-jacents historiques des institutions. Nous trouvons également que l’effet est plus important dans les industries à forte intensité de capital. La taille du marché et la distance aux marchés sont également influents sur les résultats de la taille de l’entreprise, conforme à la nouvelle littérature sur le commerce.
    Keywords: international trade, legal institutions, judicial efficiency, firm scale, commerce international, institutions juridiques, efficacité judiciaire, taille des entreprises
    JEL: F12 K4 L11 O12
    Date: 2013–04–11
  7. By: Giorgio Topa (Federal Reserve Bank of New York); Elizabeth Setren (Federal Reserve Bank of New York); Meta Brown (Federal Reserve Bank of New York)
    Abstract: The limited nature of data on employment referrals in large business and household surveys has so far restricted our understanding of the relationships among employment referrals, match quality, wage trajectories and turnover. Using a new firm-level dataset that includes explicit information on whether a worker was referred by a current employee of the company, we are able to provide rich detail on these empirical relationships for a single mid-to-large U.S. corporation, and to test various predictions of the theoretical literature on labor market referrals. We find that referred workers enter at higher wage levels, all else equal, but that the referred wage advantage dissipates by the third year of employment. After the fifth year the referral-wage relationship is reversed. Referred workers experience substantially less turnover, and this effect is relatively long-lasting. Despite higher predicted productivity for referred workers in the theoretical literature, we find, if anything, slightly slower promotion rates for referred than for non-referred workers. Finally, the wide range of skill and experience levels represented in this corporation permit detailed analysis of the role of referrals for workers from support staff to executives.
    Date: 2012
    Abstract: In this study, we seek to further delineate factors that condition the relationship between slack resources and firm performance. To do so, we develop and test a model that establishes the role of venture capital (VC) and angel investors as powerful external stakeholders who positively moderate the slack-performance relationship. In addition, we provide more insight into this relationship by examining differences between these two types of private investors and by examining the role of their ownership stakes. We test our hypotheses using a sample of 1,215 private firms, including VC-backed firms, angel-backed firms and similar firms without such investors. We find that the presence of VC investors positively moderates the relationship between both financial and human slack resources and firm performance, while angel investors only positively moderate the effect of human resource slack. Further, VC investors are only marginally better at helping entrepreneurs to extract value from human resource slack than angel investors and they are no better when it comes to financial slack. Finally, we find that the impact of financial and human resource slack on firm performance is more positive in VC-backed firms when investors hold high ownership stakes, an effect which is significantly stronger than when angel investors hold high ownership stakes.
    Date: 2013–04
  9. By: Ronald Wolthoff (University of Toronto); Benjamin Lester (Federal Reserve Bank of Philadelphia)
    Abstract: This paper studies the effect of screening costs on the equilibrium allocation of workers with different productivities to firms with different technologies. In the model, a worker's type is private information, but can be learned by the firm during a costly screening or interviewing process. We characterize the planner's problem in this environment and determine its solution. A firm may receive applications from workers with different productivities, but should in general not interview them all. Once a sufficiently good applicant has been found, the firm should instead make a hiring decision immediately. We show that the planner's solution can be decentralized if workers direct their search to contracts posted by firms. These contracts must include the wage that the firm promises to pay to a worker of a particular type, as well as a hiring policy which indicates which types of workers will be hired immediately, and which types will lead the firm to keep interviewing additional applicants.
    Date: 2012
  10. By: Vermeulen, Ben; Pyka, A.; La Poutré, J. A.; de Kok, A. G.
    Abstract: We investigate patterns of vertical governance over the product life-cycle as function of the capability regime properties imitability and substitutability. We use a novel neo-Schumpeterian model to study emerging governance patterns. We find that, in the era of incremental change, firms prefer vertical specialization. In the era of ferment, no governance form dominates. Imitability and substitutability, in interplay, determine the governance form preferred. High imitability frustrates appropriation and thereby integration for synergistic advantages. However, firms need not vertically specialize: under low substitutability, incompatibilities reduce the advantages of specialization. When both substitutability and imitability are low, firms can appropriate the value of their inventions and there is no combinatorial advantage of specialization, so firms predominantly integrate. If substitutability is high and imitability is low, the combinatorial advantage of specialization balances with the synergistic advantage of integration. --
    Date: 2013
  11. By: Jens Mohrenweiser (Zentrum für Europäische Wirtschaftsforschung Mannheim (ZEW) (Centre for European Economic Research))
    Abstract: The integration of disadvantaged youth into the labour market is a challenging policy issue. Since young people gain most from work experience and learning provided by firms, hence within apprenticeships, firms play a crucial role in training disadvantaged youths. Knowing firm characteristics that moderate the selection of firms in such training schemes might help to design more effective and efficient policy measures. This paper estimates the determinants of firms that participate in a training programme for disadvantaged youth in Germany. The paper shows that firms with greater training capacity in terms of full-time instructors and own training facilities and firms willing to invest own additional resources in the training of disadvantaged youth are more likely to participate in this training scheme. On the contrary, firm size, an increasing demand for skilled workers and difficulties in finding apprentices do not influence the participation.
    Keywords: disadvantaged youth, apprenticeship, policy evaluation
    JEL: J24 M53 M51
    Date: 2013–05
  12. By: Van den Berg A.; Grift Y.; Van Witteloostuijn A.; Boone Ch.; Van der Brempt O.
    Abstract: In this paper, we contribute to the extant Industrial Relations literature, which is almost completely confined to estimating the effects of worker participation within a single country, by conducting a comparative multi-country study using unique data from the European Company Survey 2009. We compare representation regimes within the European Union. We categorize the EU Member States into five clusters with similar participation characteristics: the Germanic, French, Anglo-Saxon, Scandinavian and transition cluster. Across these clusters, we first estimate the effects of the presence of what we refer to as an information and consultation body on firm performance, measured by economic performance of the establishment as assessed by managers-respondents. Second, we estimate the effects of managerial attitudes on performance, as we assume – and find – that only taking into account the mere presence of a worker representation is insufficient, as mutual understandings between management and employee representatives affect the functioning of the employee representation body, and hence firm performance.
    Date: 2013–04

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