nep-bec New Economics Papers
on Business Economics
Issue of 2013‒06‒30
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Foreign Ownership and the Extensive Margins of Exports: Evidence for Manufacturing Enterprises in Germany By Horst Raff; Joachim Wagner
  2. How to deal with unprofitable customers? A salesforce compensation perspective By Sumitro Banerjee; Alex P. Thevaranjan
  3. (Un)stable vertical collusive agreements By Jean J. Gabszewicz; Skerdilajda Zanaj
  4. Integrating Corporate Social Responsibility at the Start-up Level: Constraint or Catalyst for Opportunity Identification? By Vincent Lefebvre; Miruna Radu Lefebvre
  5. Investment Timing and Vertical Relationships By Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno
  6. Rewarding Stakeholders: The Perspective of Strategic Entrepreneurship By Dissanayake, Srinath
  8. Higher education experiences and new venture performance By Broström, Anders; Baltzopoulos, Apostolos
  9. Do outliers and unobserved heterogeneity explain the exporter productivity premium? Evidence from France, Germany and the United Kingdom By Temouri, Yama; Wagner, Joachim

  1. By: Horst Raff; Joachim Wagner
    Abstract: We examine how foreign ownership of a firm affects the variety of goods that the firm exports and the number of countries it trades with. We construct a simple theoretical model of how foreign ownership may affect these extensive margins of exports and take this model to data from Germany, one of the leading actors on the world market for goods. In line with theoretical predictions we find that foreign-owned firms do export more goods to more countries after controlling for firm size, productivity and industry affiliation. These differences between foreign-owned firms and domestically controlled firms are highly statistically significant, and they are large from an economic point of view, with foreign-owned firms exporting up to 39% more goods to up to 31% more countries
    Keywords: international trade, foreign ownership, multinational enterprise, foreign direct investment, extensive margins of exports, Germany
    JEL: F14 F23
    Date: 2013–06
  2. By: Sumitro Banerjee (ESMT European School of Management and Technology); Alex P. Thevaranjan (Whitman School of Management, Syracuse University)
    Abstract: We show that prices and incentives recommended by the salesforce literature when targeting a profitable segment can attract unprofitable customers, particularly when salespeople have high productivity and low risk (i.e., risk aversion times uncertainty). Therefore, when customers are unidentifiable, unprofitable customers may also enter the market creating an adverse selection problem for the salespeople. By solving the moral hazard and adverse selection problems simultaneously, we show that firms can prevent the entry of unprofitable customers by “screening”. Although, screening generally requires a higher price to dissuade unprofitable customers, when firms hire salespeople, however, it requires lowering of both selling effort and the price. It also leads to a “sales trap” restricting the sales to the profitable segment to a fixed level. Screening, therefore, lowers firm profits obtained from the profitable customers. When salespeople are highly productive and risk tolerant, this drop in profit can be so high that “accommodating” unprofitable customers becomes the preferred strategy. Furthermore, the adverse selection problem intensifies and accommodation becomes more preferable when there is no moral hazard between firm and the salesperson. Behavior of unprofitable customers, therefore, must be an important consideration when targeting high-value customers and designing salesforce compensation.
    Keywords: Salesforce compensation, target markets, adverse selection, screening, pooling, principal-agent models, agency theory
    Date: 2013–06–07
  3. By: Jean J. Gabszewicz (CORE, Université Catholique de Louvain, Belgique); Skerdilajda Zanaj (CREA, Université de Luxembourg)
    Abstract: In this paper, we extend the concept of stability to vertical collusive agreements, involving downstream and upstream firms, using a setup of successive Cournot oligopolies. We show that a stable vertical agreement always exists: the unanimous vertical agreement involving all downstream and upstream firms. Thus, stable vertical collusive agreements exist even for market structures in which horizontal cartels would be unstable. We also show that there are economies for which the unanimous agreement is not the only stable one.
    Keywords: collusion, stability, vertical agreement.
    JEL: D43 L13
    Date: 2013
  4. By: Vincent Lefebvre (ISC Paris Business School - ISC Paris Business School); Miruna Radu Lefebvre (Audencia Recherche - Audencia)
    Abstract: This conceptual paper examines the issue of integrating CSR at the start-up level with the aim of increasing the firm's ability to identify new opportunities. Both a constraint and an occasion to strengthen the company's legitimacy and competitive advantage, CSR principles and practices are a key vehicle for opportunity identification and implementation. Historically, SMEs have contributed significantly to the improvement of existing products and services, and the creation of new ones. Grounding CSR in the strategy of enterprises at the start-up level is increasingly examined as an effective management tool with multiple benefits for opportunity identification. CSR may be promoted as a means of nurturing creativity and innovation at the start-up level and beyond, through pushing entrepreneurs to imagine new business models, to discover new raw materials, as well as to create new products and services so as to respond to both economic and social expectations.
    Keywords: opportunity recognition, entrepreneurial opportunity, CSR, entrepreneurship, creativity
    Date: 2012–07–01
  5. By: Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno
    Abstract: We show that the standard analysis of vertical relationships transposes directly to investment dynamics. Thus, when a firm undertaking a project requires an outside supplier (e.g., an equipment manufacturer) to provide it with a discrete input to serve a growing but uncertain demand, and if the supplier has market power, investment occurs too late from an industry standpoint. The distortion in firm decisions is characterized by a Lerner-type index. Despite the underlying investment option, greater volatility can result in a lower value for both firms. We examine several contractual alternatives to induce efficient timing, a novel vertical restraint being for the upstream to sell a call option on the input. We also extend the model to allow for downstream duopoly. When downstream firms are engaged in a preemption race, the upstream firm sells the input to the first investor at a discount such that the race to preempt exactly offsets the vertical distortion, and this leader invests at the optimal time. These results are illustrated with a case study drawn from the pharmaceutical industry.
    Keywords: Irreversible investment; Preemption; Real options; Vertical relations
    JEL: C73 D43 D92 L13
    Date: 2013–06–19
  6. By: Dissanayake, Srinath
    Abstract: Prime concern on stakeholders is a crucial aspect in each business success. Among the wide spectrum of organizational strategies, Strategic Entrepreneurship pays a greater emphasis. This essay details practical as well as empirical grounds with regard to the notion of Strategic Entrepreneurship. Focally, strategic Entrepreneurship is an integration of Entrepreneurship (Opportunity Seeking Behavior) and Strategic Management (Advantage Seeking Behavior). Thus I conclude, an amalgamation of Strategic Management and Entrepreneurship (I.e. Strategic Entrepreneurship) inevitably leads to create wealth, value and survival of the business. Given all the elaborations the author replicates the conceptual model of SE in a dissimilar viewpoint.
    Keywords: Opportunity Seeking Behavior, Advantage Seeking Behavior, Stakeholders, Strategic Entrepreneurship
    JEL: L1
    Date: 2013–06–26
  7. By: Miruna Radu Lefebvre (Audencia Recherche - Audencia); Renaud Redien-Collot (Novancia - Novancia)
    Abstract: This paper examines the legitimating process of a French higher education institution entirely dedicated to entrepreneurship. Management and entrepreneurship education strive both for academic and market legitimacies. We think entrepreneurship education is confronted with an additional challenge: building political legitimacy. We analyze the "extreme case" study of Advancia, a Paris business school. We examined the business school's legitimation process over a period of six years, from 2004 to 2010. This "extreme case" may be informative for other business schools willing to reach academic, market and political legitimacies while at the same time trying to develop a coherent and stable global strategy in a competitive higher education landscape. This is the first article dealing with the topic of legitimacy acquisition processes, with the aim of emphasizing the institutionalization of entrepreneurial mindset in French entrepreneurship higher education.
    Keywords: entrepreneurship; education; legitimacy
    Date: 2012–12–01
  8. By: Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Baltzopoulos, Apostolos (Swedish Competition Authority)
    Abstract: Human capital theory suggests that higher education, as a means of capability creation and of ability screening, is positively associated with individuals’ success as entrepreneurs. This paper argues that social capital perspectives, in particular the theory of local embeddedness and team formation theory, complement human capital theory in explaining the relationship between higher education attainment and entrepreneurial success. However, human and social capital perspectives apply to different domains. While the former is appropriate for knowledge-based entrepreneurship, the latter is primarily valid in contexts where specialized analytical knowledge plays a less accentuated role. These propositions are supported by an investigation of survival and growth of entrepreneurial ventures in Sweden.
    Keywords: Higher education; entrepreneurship; universities; entrepreneurial performance
    JEL: I23 L26 O18 R30
    Date: 2013–06–20
  9. By: Temouri, Yama (Aston University); Wagner, Joachim (Leuphana University)
    Abstract: A stylized fact from the literature on the Micro-econometrics of International Trade and a central implication of the heterogeneous firm models from the New New Trade Theory is that exporters are more productive than non-exporters. It is argued that this exporter productivity premium is due to extra costs of exporting that can be covered only by more productive firms. However, in recent papers that control for extreme observations and unobserved firm heterogeneity by applying a highly robust fixed-effects estimator, no such exporter productivity premium is found for firms from manufacturing and services industries in Germany. This paper uses enterprise level panel data for France, Germany and the United Kingdom from 2003 to 2008 to systematically investigate the role of outliers and unobserved firm heterogeneity for estimates of the exporter productivity premium. We report that outliers do have an influence on the estimated exporter productivity premium. We argue that the vanishing exporter premium in robust fixed effects estimations that is reported for all three countries is caused by characteristics of firms that start or stop to export over the period under investigation, and that are not representative for the bulk of firms that either export or not.
    Keywords: Export; productivity premium; outlier; unobserved heterogeneity; robust estimation
    JEL: F14
    Date: 2013–06–18

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