nep-bec New Economics Papers
on Business Economics
Issue of 2013‒07‒28
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Short-Term Shareholders, Bubbles, And CEO Myopia By John Thanassoulis
  2. Optimal R&D Subsidies with Heterogeneous Firms in a Dynamic Setting By Hall, Joshua; Laincz, Christopher
  3. Quantitative Comparative Statics for a Multimarket Paradox By Tobias Harks; Philipp von Falkenhausen
  4. Business Intelligence Support For Project Management By Muntean, Mihaela; Cabau, Liviu Gabiel
  5. Cheating in the workplace: An experimental study of the impact of bonuses and productivity By David Gill; Victoria Prowse; Michael Vlassopoulos
  6. Exploring the interrelation between process management and organizational culture: A critical review By Grau, Corinna; Moormann, Jürgen
  7. Firm heterogeneity in TFP, sectoral innovation and geography. Evidence from Italy By Aiello, Francesco; Pupo, Valeria; Ricotta, Fernanda
  8. The Evolution Of Cooperation In Business: Individual Vs. Group Incentives By Daniel Ladley; Ian Wilkinson; Louise Young
  9. Impact of quality and environmental investment on business competitiveness and profitability: The case of travel agencies By Llorenç Bagur; Jordi Perramon; Oriol Amat
  10. The fight against cartels: a transatlantic perspective By E. Dargaud; A. Mantovani; C. Reggiani

  1. By: John Thanassoulis
    Abstract: This paper analyses the real economy effects of firms having some shareholders with a short investment horizon on their shareholder register.  Short-term shareholders cause management to be concerned with the path of the share price as well as its ultimate value.  Such shareholders in an economy lead to bubbles in the prices of key inputs, to the misallocation of firms to risky business models, and to increased costs of capital.  For individual firms short-term shareholders induce the Board to reduce deferred incentives in CEO pay prompting CEO myopia and reduced investments in the long-run capabilities of the firm.
    Keywords: Investor time-horrizons, bubbles, CEO compensation, cost of capital, short-termism, bonuses, shareholder register
    JEL: G12 G34 L21 L25
    Date: 2013–07–04
  2. By: Hall, Joshua (University of Tampa); Laincz, Christopher (Department of Economics & International Business LeBow College of Business Drexel University)
    Abstract: When firms engaged in R&D are observably heterogeneous (in size) and policymakers are able to condition policy on the observed heterogeneity, what is the optimal policy? This paper starts with a static two-stage duopoly model of R&D competition with uncertainty and finds it welfare enhancing to subsidize the larger firms, with no subsidies for (or taxes on) the smaller firm (extending existing results, Lahiri and Ono, 1999). This result follows because marginal cost reductions by the largest firm have larger net effects on consumer and producer surplus. The policymaker's goal is effectively to minimize the average cost of production. However, when we move to a dynamic setting, the optimal policy is less clear. When firms compete repeatedly, the degree of competition becomes an endogenous variable over the infinite horizon. The optimal policy depends on the nature of long-run competition. In some situations, the optimal policy remains the same, subsidize the larger firm. However, in other scenarios, the policymaker optimally chooses to subsidize the smaller firm more heavily to promote more intense competition which lowers the long-run deadweight loss and long run costs through increased R&D competition.
    Keywords: R&D; subsidies; duopoly; dynamics; heterogeneous firms
    JEL: L11 L16 O31
    Date: 2012–06–26
  3. By: Tobias Harks; Philipp von Falkenhausen
    Abstract: Comparative statics is a well established research field where one analyzes how changes in parameters of a strategic game affect the resulting equilibria. Examples of such parameter changes include tax/subsidy changes or production cost shifts in oligopoly models. While classic comparative statics is mainly concerned with qualitative approaches (e.g., deciding whether a marginal parameter change improves or hurts equilibrium profits or welfare), we aim at quantifying the possible extend of such an effect. We apply our quantitative approach to the multimarket oligopoly model introduced by Bulow, Geanakoplos and Klemperer (1985). In this model, there are two firms competing on two markets with one firm having a monopoly on one market. Bulow et al. describe the counterintuitive example of a positive price shock in the firm's monopoly market resulting in a reduction of the firm's equilibrium profit. We quantify for the first time the worst-case profit reduction for the case of two markets with affine price functions and firms with convex cost technologies. We show that the relative loss of the monopoly firm is at most 25% no matter how many firms compete on the second market. In particular, we show for the setting of Bulow et al. involving affine price functions and only one additional firm on the second market that the worst case loss in profit is bounded by 6.25%. We further investigate a dual effect: How much can a firm gain from a negative price shock in its monopoly market? Our results imply that this gain is at most 33%. We complement our bounds by concrete examples of markets where these bounds are attained.
    Date: 2013–07
  4. By: Muntean, Mihaela; Cabau, Liviu Gabiel
    Abstract: With respect to the project management framework, a project live cycle consists of phases like: initiation, planning, execution, monitoring & control and closing. Monitoring implies measuring the progress and performance of the project during its execution and communicating the status. Actual performance is compared with the planned one. Therefore, a minimal set of key performance indicators will be proposed. Monitoring the schedule progress, the project budget and the scope will be possible. Within a Business Intelligence initiative, monitoring is possible by attaching the key performance indicators to the OLAP cube. In turn, the cube was deployed over a proper data warehouse schema.
    Keywords: project management, business intelligence, key performance indicators
    JEL: L21 M0
    Date: 2013–03–08
  5. By: David Gill; Victoria Prowse; Michael Vlassopoulos
    Abstract: We use an online real-effort experiment to investigate how bonus-based pay and worker productivity interact with workplace cheating.  Firms often use bonus-based compensation plans, such as group bonuses and firm-wide profit sharing, that induce considerable uncertainty in how much workers are paid.  Exposing workers to a compensation scheme based on random bonuses makes them cheat more but has no effect on their productivity.  We also find that more productive workers behave more dishonestly.  These results are consistent with workers' cheating behavior responding to the perceived fairness of their employer's compensation scheme.
    Keywords: Bonus, compensation, cheating dishonesty, lying, employee crime, productivity, slider task, real effort, experiment
    JEL: C91 J33
    Date: 2013–07–08
  6. By: Grau, Corinna; Moormann, Jürgen
    Abstract: Managing the business processes of a company is a task which has emerged as a top priority across all industries. However, business process management (BPM) is not just a set of structured methods and technologies which can simply be assigned to employees. In contrary, the success of any process initiative is interwoven with the culture of the respective company. In addition, in most cases there is not only one organizational culture but often a range of subcultures within an organization due to previous mergers, existing subsidiaries etc. Despite its importance, the interrelation between BPM and organizational culture has been only sparsely explored. This paper analyzes and determines the status quo of academic literature concerning the interrelation between BPM and organizational culture. The results reveal considerable differences in the perception of the interface between both fields. Furthermore, our analysis shows that the organizational psychological perspective has been widely neglected in process management literature. To the best of our knowledge, this is the first literature review written from both a process management and an organizational psychological perspective. As such, it strives to contribute to a comprehensive and thorough understanding of this interrelation. Based on the review we develop a framework, serving as a basis for a deeper understanding of the interdependency and providing avenues for future research. --
    Keywords: Business Process Management (BPM),Organization,Organizational culture,Organizational psychology,Process
    JEL: L20 M10 M14
    Date: 2013
  7. By: Aiello, Francesco; Pupo, Valeria; Ricotta, Fernanda
    Abstract: Sectoral and territorial specificities affect the firm’s capabilities of being productive. While there is a wide consensus on this, a quantitative measure of the these effects has been lacking. To this end, we combine a dataset of Italian firms with some meso regional and sectoral variables and apply a cross-classified model that allows for a clear distinction between firm, region-specific and sector-specific effects. After observing a marked TFP heterogeneity across firms, the paper addresses the issue of understanding how much differences in firms’ productivity depend on regional localisation and sector specificities. Results refer to 2004-2006 and are threefold. Firstly, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that sector is more important than location in explaining firms’ TFP. Lastly, the results show that firm TFP increases when it belongs to more innovative sectors. Similarly, companies get benefits from belonging to sectors where there is a high proportion of firms using R&D public support and a high propensity to collaborate in innovative projects.
    Keywords: Total Factor Productivity, Firms’ Heterogeneity, Sectoral innovation, Geography, Cross-Classified Models
    JEL: L25 L60 O33
    Date: 2013–07–23
  8. By: Daniel Ladley; Ian Wilkinson; Louise Young
    Abstract: Cooperative relations, within and between firms, play important roles in business. How to produce such relations, however, is less well understood. Building on work in evolutionary biology we examine the conditions under which group based incentives result in better performance than individual based incentives. We find that when individual and group interests are not aligned, group incentive systems lead to both higher group and individual performance. Hybrid reward systems, with both group and individual components, are found on average to be inferior to pure group based systems, but superior for some specific cases.
    Keywords: Emergence of cooperation, Incentive systems, Iterated games, Group selection
    JEL: D00 M52 C63
    Date: 2013–07
  9. By: Llorenç Bagur; Jordi Perramon; Oriol Amat
    Abstract: Few studies have examined the combined effect of implementing quality and environmental management within the service sector. This void is more evident if we focus on segments in which small businesses predominate and even more so if we look for highly competitive sectors that are very variable and that have high business mortality. After analysing 198 surveys of Spanish travel agency managers using structural equations, it can be concluded that practices of quality management have a significant direct impact on business competitiveness but not on this business's financial results, at least directly. However, there is a significant relationship between environmental management practices and economic benefits. This article suggests that commitment to quality and the environment can allow small businesses in the service sector to have a competitive advantage that will separate surviving and ceased operations, particularly in sectors that are rapidly evolving and highly competitive.
    Keywords: Quality management, Environmental management, Firm performance and Travel agencies.
    Date: 2013–07
  10. By: E. Dargaud; A. Mantovani; C. Reggiani
    Abstract: The fight against cartels is a priority for antitrust authorities on both sides of the Atlantic. What differs between the EU and the US is not the basic toolkit for achieving deterrence, but to whom it is targeted. In the EU, pecuniary sanctions against the firm are the only instruments available to the Commission, while in the US criminal sanctions are also widely employed. The aim of this paper is to compare two different types of fines levied on managerial firms when they collude. We consider a profit based fine as opposed to a delegation based fine, with the latter targeting the manager in a more direct way. Under the assumption of revenue equivalence, we find that the delegation based fine, although distortive, is more effective in deterring cartels than the profit based one. When evaluating social welfare, a trade-off between deterrence and output distortion can arise. However, if the antitrust authority focuses on consumer surplus, then the delegation based fine is to be preferred.
    JEL: K21 L44 K42 L21
    Date: 2013–07

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