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on Business Economics |
| By: | Marin, Dalia; Rousová, 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; organisational transfer between countries; the theory of the firm; trade and organisations |
| JEL: | D23 F12 F23 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9500&r=bec |
| By: | Volker Nocke; Stephen Yeaple |
| Abstract: | We present an international trade model with multiproduct firms. Firms are heterogeneously endowed with two types of capabilities that jointly determine the trade-off within firms between managing a large portfolio of products and producing at low marginal cost. The model can explain many of the documented cross-sectional correlations in firm performance measures, including why larger firms are more productive and more diversified, and yet more diversified firms trade at a discount. Globalization is shown to induce heterogeneous responses across firms in terms of scope and productivity, some of which are consistent with existing empirical work, while others are potentially testable. |
| JEL: | F12 F15 L25 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19409&r=bec |
| By: | Johansson, Anders C. (Stockholm China Economic Research Institute); Feng, Xunan (Shanghai University) |
| Abstract: | This paper investigates CEO incentives in Chinese state-controlled firms. We find that firm performance has a positive effect on CEO compensation. We also find that firm performance is positively associated with CEO promotion and negatively associated with CEO turnover. CEOs for state-controlled firms thus face significant incentives, not only in monetary form, but also in terms of career prospects. These results suggest that the CEO labor market in the Chinese state sector exhibits characteristics similar to those of managerial labor markets in developed countries, at least during our sample period. Moreover, we show that local institutions have a significant impact on the relationship between CEO incentives and firm performance, with performance having a larger effect on CEO compensation, promotion and turnover in regions characterized by stronger institutions. Overall, our results demonstrate that firm performance is associated with CEO incentives also for state-controlled firms in China, suggesting that there is a functioning labor market for top managers in the Chinese state sector. |
| Keywords: | State-controlled firms; Managerial labor market; Performance; CEO compensation; CEO promotion; CEO turnover; China |
| JEL: | G30 G38 J30 M52 P30 |
| Date: | 2013–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2013-027&r=bec |
| By: | McCormack, John; Propper, Carol; Smith, Sarah L. |
| Abstract: | Using a tried and tested measure of management practices which has been shown to predict firm performance, we survey nearly 250 departments across 100+ UK universities. We find large differences in management scores across universities and that departments in older, research-intensive universities score higher than departments in newer, more teaching-oriented universities. We also find that management matters in universities. The scores, particularly with respect to provision of incentives for staff recruitment, retention and promotion, are correlated with both teaching and research performance conditional on resources and past performance. Moreover, this relationship holds for all universities, not just research-intensive ones. |
| Keywords: | management practices; performance; universities |
| JEL: | I32 M51 M54 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9560&r=bec |
| By: | Carballo, Jerónimo; Ottaviano, Gianmarco; Volpe Martincus, Christian |
| Abstract: | We use highly disaggregated firm-level export data from Costa Rica, Ecuador, and Uruguay over the period 2005-2008 to provide a precise characterization of firms' export margins, across products, destination countries, and crucially customers. We show that a firm's number of buyers and the distribution of sales across them systematically vary with the characteristics of its destination markets. While most firms serve only very few buyers abroad, the number of buyers and the skewness of sales across them increases with the size and the accessibility of destinations. We develop a simple model of selection with heterogeneous buyers and sellers consistent with these findings in which tougher competition induces a better alignment between consumers' ideal variants and firms' core competencies. This generates an additional channel through which tougher competition leads to higher productivity and higher welfare and hints at an additional source of gains from trade as long as freer trade fosters competition. |
| Keywords: | Buyer Margins; Competition; Market Segmentation; Markups |
| JEL: | F12 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9584&r=bec |
| By: | Neus Herranz,; Stefan Krasa,; Anne P. Villamil |
| Abstract: | This paper conducts a theoretical and quantitative analysis of how entrepreneurs choose firm size, capital structure, default, and owner consumption to manage firm risk, including how these choices change with risk aversion. We decompose an entrepreneur’s default decision into three elements: the fraction of firm debt; the potential reduction in personal consumption from losing the firm; and the ratio of personal wealth to firm scale, which determines an entrepreneur’s ability to inject personal funds to continue operation. Data from the Survey of Small Business Finances is used to calibrate the model and estimate entrepreneur risk aversion. We determine the evolution of entrepreneur net worth, consumption, and firm assets over time. We find that many entrepreneurs have lower net worth and consumption than non-entrepreneurs with the same preferences, but the densities of the distributions of consumption and net-worth have wide upper tails. Thus, entrepreneurship can be a path toward great wealth and high consumption for the top quantiles of entrepreneurs. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:189&r=bec |
| By: | Alessandra Colombelli (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - Université Nice Sophia Antipolis [UNS] - CNRS : UMR6227); Francesco Quatraro (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis [UNS]) |
| Abstract: | This paper investigates the relationship between the creation of new firms and the properties of the local knowledge bases, like coherence, cognitive distance and variety. By combining the literature on the knowledge spillovers of entrepreneurship and that on the recombinant knowledge approach, we posit that locally available knowledge matters to the entrepreneurial process, but the type of knowledge underlying theses dynamics deserve to be analyzed. The analysis is carried out on 104 Italian NUTS 3 regions observed over the time span 1995-2011. The results show that the complementarity degree of local knowledge is important, while increasing similarity yields negative effects. This suggests that the creation of new firms in Italy is associated to the exploitation of well established technological trajectories grounded on competences accumulated over time, although cognitive proximity is likely to engender lock-in effects and hinder such process. |
| Keywords: | New Firm Formation; Knowledge-Spillovers Theory of Entrepreneurship; Recombinant Knowledge; Knowledge Coherence; Variety; Cognitive Distance; Italy |
| Date: | 2013–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00858989&r=bec |
| By: | Görg, Holger; Spaliara, Marina-Eliza |
| Abstract: | Using firm-level data for the UK, we investigate the link between firms’ financial health, borrowing ratio and export exit, paying special attention to the recent financial crisis. Our results show that deterioration in the financial position of firms has increased the hazard of export exit during the crisis. We also find that the sensitivity of export exit to changes in firms’ financial condition is higher during the crisis for those firms which face increases in loan spreads associated with the firm-specific interest rate. |
| Keywords: | export market exit; financial crisis; financial pressure |
| JEL: | F1 L2 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9599&r=bec |
| By: | Beaudry, Paul; Portier, Franck |
| Abstract: | There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival of news, can cause business cycle fluctuations driven by expectational change, and we review the empirical evidence aimed at evaluating its relevance. In particular, we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations, while at the same time we emphasize the many challenges that must be addressed before a proper assessment of its role in business cycles can be established. |
| Keywords: | Business Cycles; Expectations; News; Pigou; Recessions |
| JEL: | E3 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9624&r=bec |