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on Business Economics |
| 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 organization 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 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:15131&r=bec |
| By: | Chia-Lin Chang (National Chung Hsing University, Taiwan); Hui-Kuang Hsu (National Pingtung Institute of Commerce, Taiwan); Michael McAleer (Erasmus University Rotterdam, Kyoto University, Japan, and Complutense University of Madrid, Spain) |
| Abstract: | This paper examines the size effects of volatility spillovers for firm performance and exchange rates with asymmetry in the Taiwan tourism industry. The analysis is based on two conditional multivariate models, BEKK-AGARCH and VARMA-AGARCH, in the volatility specification. Daily data from 1 July 2008 to 29 June 2012 for 999 firms are used, which covers the Global Financial Crisis. The empirical findings indicate that there are size effects on volatility spillovers from the exchange rate to firm performance. Specifically, the risk for firm size has different effects from the three leading tourism sources to Taiwan, namely USA, Japan, and China. Furthermore, all the return series reveal quite high volatility spillovers (at over sixty percent) with a one-period lag. The empirical results show a negative correlation between exchange rate returns and stock returns. However, the asymmetric effect of the shock is ambiguous, owing to conflicts in the significance and signs of the asymmetry effect in the two estimated multivariate GARCH models. The empirical findings provide financial managers with a better understanding of how firm size is related to financial performance, risk and portfolio management strategies that can be used in practice. |
| Keywords: | Tourism, Size effects, Small-firm effects, Financial performance, Spillover effects, MGARCH, VARMA, BEKK |
| JEL: | C22 G32 L83 |
| Date: | 2013–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013008&r=bec |
| By: | Jurjen J.A. Kamphorst (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam) |
| Abstract: | In many organizations, reward decisions depend on subjective performance evaluations. However, evaluating an employee's performance is often difficult. In this paper, we develop a model in which the employee is uncertain about his own performance and about the manager's ability to assess him. The manager gives an employee a performance appraisal with a view of affecting the employee's self perception, and the employee's perception of the manager's ability to assess performance. We examine how performance appraisals affect the employee's future performance. The predictions of our model are consistent with various empirical findings. These comprise (i) the observation that managers tend to give positive appraisals, (ii) the finding that on average positive appraisals motivate more than negative appraisals, and (iii) the observation that the effects of appraisals depend on the employee's perception of the manager's ability to assess performance accurately. |
| Keywords: | Subjective Performance Appraisal, Credibility, Cheap Talk |
| JEL: | M52 M54 D82 D83 |
| Date: | 2012–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012034&r=bec |
| By: | Petar Stankov |
| Abstract: | Economies have markedly different firm size distributions. At the same time, firms of different size grow differently after identical financial- and product-market liberalization reforms. Thus, identical reforms can produce different growth outcomes across countries. This result is reached after exploring firm-level data on sales and sales per worker across 135 developing and post-transition economies. It helps explain the remarkable variation in the vast development literature studying the effects of various market-oriented reforms across countries and over time. |
| Keywords: | financial reforms; economic growth; firm size distributions; reform outcome divergence; |
| JEL: | D22 L11 L25 L53 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp485&r=bec |
| By: | Mark Humphery-Jenner (University of New South Wales, Tilburg University); Zacharias Sautner (University of Amsterdam, Duisenberg school of finance); Jo-Ann Suchard (University of New South Wales) |
| Abstract: | We study the role of private equity firms in cross-border mergers and acquisitions. We find that private equity-owned firms are more likely to become targets in crossborder M&A transactions. This effect is particularly strong in transactions where the target or its shareholders actively reach out for an acquirer. On average, cross-border deals with private equity-involvement are not associated with higher announcement returns. However, announcement returns are higher if the acquirer is owned by a private equity firm and the target is from a country with poor corporate governance. We provide evidence indicating that the international networks and connections that result from prior cross-border deals can explain why private equity firms create value in such deals. Our findings suggest that private equity firms can help to reduce information asymmetries in certain cross-border M&A deals. We perform several tests to address possible endogeneity concerns. |
| Keywords: | G34, G32, G24 |
| Date: | 2012–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012031&r=bec |
| By: | Florian S. Peters (Duisenberg school of finance, University of Amsterdam); Alexander F. Wagner (Swiss Finance Institute, University of Zuerich, CEPR, Harvard University) |
| Abstract: | We establish that CEOs of companies experiencing volatile industry conditions are more likely to be dismissed. At the same time, industry risk is, controlling for various other factors, unlikely to be directly associated with CEO compensation other than through dismissal risk. Using this identification strategy, we document that CEO turnover risk is significantly positively associated with compensation. This finding is important because job-risk compensating wage differentials arise naturally in competitive labor markets. By contrast, the evidence rejects a simple entrenchment model according to which powerful CEOs have lower job risk and at the same time secure higher compensation. |
| Keywords: | CEO turnover; CEO Compensation; Corporate Governance |
| JEL: | D8 G34 M52 |
| Date: | 2012–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012021&r=bec |
| By: | Hans Koster (VU University Amsterdam); Jos N. van Ommeren (VU University Amsterdam); Piet Rietveld (VU University Amsterdam) |
| Abstract: | This paper examines the effects of specialisation (within-sector clustering) and diversity (between-sector clustering) on business services profitability and location choice. We apply a semiparametric Poisson sorting model allowing for firm-specific effects. We find that for most firms, profitability of business services firms is substantially higher close to specialised clusters of business services firms. A standard deviation increase in business services specialisation leads to on average a 40 percent increase in the probability that a business services firm locates there, supporting theories of Marshall, Arrow and Romer. It is also profitable for most business services firms to locate near a group of firms that belong to the same sector, not necessarily business services firms, so diversity is negatively related to location decisions. Almost all firms either benefit from within-sector clustering or between-sector clustering. Within-sector clusters are particularly profitable for large mature firms, whereas between-sector clusters are relatively more profitable for smaller innovative firms. |
| Keywords: | Sorting; Agglomeration Economies; Specialisation; Diversity; Heterogeneity; Semiparametric Estimation |
| JEL: | R12 R14 R39 |
| Date: | 2011–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2011085&r=bec |
| By: | Javdani, Mohsen (University of British Columbia, Okanagan); McGee, Andrew (Simon Fraser University) |
| Abstract: | We examine how immigrants in Canada fare in terms of promotions relative to their native peers. Using linked employer-employee data and firm effects, we identify the extent to which differences in promotion outcomes result from immigrants sorting into firms offering "dead-end" jobs versus facing intra-firm barriers to advancement. We find that while white immigrants experience broadly similar promotion outcomes relative to their white native peers, visible minority immigrants – particularly those in their first five years in Canada – are substantially less likely to have been promoted and have been promoted fewer times with their employers than their white native peers. Newly arrived female visible minority immigrants sort into firms offering "dead end" jobs, but most of the differences in promotion outcomes between immigrants and their native peers result from intra-firm differences in promotion outcomes. The findings imply that policies that do not tackle barriers to advancement within firms may be insufficient to address the difficulties faced by immigrants in the labor force. |
| Keywords: | promotions, immigration |
| JEL: | J61 J71 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7378&r=bec |
| By: | Stephan Brunow (Institute for Employment Research, Nuremberg, Germany); Peter Nijkamp (VU University Amsterdam) |
| Abstract: | There is evidence from the literature that firms enjoy higher productivity levels when the workforce employed is culturally more diverse. It is an open question whether this gain is utilized to shift the supply curve and set lower prices, in order to achieve a higher demand and possibly higher revenues. This knowledge gap is not addressed in the existing literature, and forms the departure of our research. We introduce a reduced-form model, inspired by the study of Melitz and Ottaviano (2008) on heterogeneous firms, and add labour productivity by using the approach of Ottaviano and Peri (2005) on cultural diversity. In our empirical study, we employ German data, while the field of research is conducted for single plants, and industry-specific effects are taken into account. Our analysis shows significant positive effects of the cultural diversity of the high-skilled workforce on the market size of single establishments. We conclude that emerging productivity gains are not just paid as dividend or factor rewards but are also used to set lower prices in order to achieve higher demand. |
| Keywords: | cultural diversity, firm heterogeneity, market size |
| JEL: | J15 L11 L25 |
| Date: | 2012–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012082&r=bec |
| By: | Paolo Bertoletti (Department of Economics and Management, University of Pavia); Federico Etro (Department of Economics, University of Venice Ca' Foscari) |
| Abstract: | We study monopolistic competition under indirect additivity of preferences. This is dual to the Dixit-Stiglitz model, where direct additivity is assumed, with the CES case as the only common ground. Other examples include (perceived) demand functions that are exponential or linear. Our equilibrium results are generally in contrast with those received by the literature. An increase of the number of consumers never affects prices and firms’ size, but increases proportionally the number of firms, creating pure gains from variety. An increase in individual income increases prices (and more than proportionally the number of varieties) and reduces firms’ size if and only if the price elasticity of demand is increasing. We also study the endogenous market structure with Bertrand competition (in which a pro-competitive effect of market size arises) and the case for inefficient entry. |
| Keywords: | Monopolistic competition, Indirect additivity, Dixit-Stiglitz model, Endogenous entry |
| JEL: | D11 D43 L11 F12 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0043&r=bec |