nep-bec New Economics Papers
on Business Economics
Issue of 2013‒10‒02
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Female-Led Firms: Performance and Risk Attitudes By Parrotta, Pierpaolo; Smith, Nina
  2. Firm Volatility in Granular Networks By Bryan Kelly; Hanno Lustig; Stijn Van Nieuwerburgh
  3. Industrial dynamics and clusters: a survey By Koen Frenken; Elena Cefis; Erik Stam
  4. Business Restructuring of Japanese Firms: Structural changes during the "Lost Decades" By MORIKAWA Masayuki
  5. The Macro-dynamics of Sorting between Workers and Firms By Jeremy Lise; Jean-Marc Robin
  6. Trade Liberalization, Division of Labor, and Firm Productivity By Kamei, Keita
  7. Firms and gender: performance differentials between male and female firms By Domenico Depalo; Francesca Lotti
  8. Price setting practices in Greece: evidence from a small-scale firm-level survey By Daphne Nicolitsas
  9. A theory of markets with return-seeking firms By Murray, Cameron

  1. By: Parrotta, Pierpaolo (Aarhus School of Business); Smith, Nina (Aarhus University)
    Abstract: This paper investigates the relationship between gender of the CEO and composition of the board of directors (female chairman and share of women in the boardroom) and firm's risk attitudes measured as variability in four firm outcome variables (investments, profits, return to equity, and sales). Using a merged employer-employee panel sample of Danish companies with more than 50 employees, we find extensive evidence of a negative association between female CEO and firm's risk attitudes. This finding might be consistent with the theoretical assumption according to which women typically present a substantially higher risk aversion profile and put more effort in monitoring firm activities than men in the financial matter domains. A number of robustness checks corroborate and better explain our main findings.
    Keywords: firm performance, risk aversion, female CEO
    JEL: G34 J16 L25
    Date: 2013–09
  2. By: Bryan Kelly; Hanno Lustig; Stijn Van Nieuwerburgh
    Abstract: We propose a network model of firm volatility in which the customers’ growth rate shocks influence the growth rates of their suppliers, larger suppliers have more customers, and the strength of a customer-supplier link depends on the size of the customer firm. Even though all shocks are i.i.d., the network model produces firm-level volatility and size distribution dynamics that are consistent with the data. In the cross section, larger firms and firms with less concentrated customer networks display lower volatility. Over time, the volatilities of all firms co-move strongly, and their common factor is concentration of the economy-wide firm size distribution. Network effects are essential to explaining the joint evolution of the empirical firm size and firm volatility distributions.
    JEL: E1 G10
    Date: 2013–09
  3. By: Koen Frenken; Elena Cefis; Erik Stam
    Abstract: We review the literature on clusters and their effects on entry, exit and growth of firms as well on the evolutionary dynamics underlying the process of cluster formation. Our extensive review shows that there is strong evidence that clusters promote entry, but little evidence that clusters enhance firm growth and firm survival. The emergence of clusters is best understood as an evolutionary process of capability transmission between parent firms and their spinoffs, rather than as an outcome of localisation economies that would increase the performance firms in clusters compared to firms outside clusters. From a number of open questions we distil various future research avenues stressing the importance of understanding firm heterogeneity and the exact mechanisms underlying localisation economies.
    Keywords: entry, exit, industrial cluster, localisation economies, product lifecycle, industry lifecycle, evolutionary economic geography, firm heterogeneity
    JEL: L10 L20 L26 R10
    Date: 2013–09
  4. By: MORIKAWA Masayuki
    Abstract: This paper is an overview of the business restructuring—the entry into new businesses and the exit from unprofitable ones—of Japanese firms and its relationship with the corporate governance system. Specifically, we analyze changes in the restructuring behavior of Japanese firms by comparing two identical surveys conducted in 1998 and 2012. These surveys include large listed and small unlisted firms. There are many stable characteristics of Japanese firm restructuring behavior: the significant role of workers and customers/suppliers as stakeholders and the reluctance to reduce the number of employees. Japanese firms have become active in restructuring their businesses through mergers and acquisitions (M&As) to expand business areas and divestitures of unprofitable segments.
    Date: 2013–09
  5. By: Jeremy Lise (University College London); Jean-Marc Robin (Sciences-Po, Paris and University College London)
    Abstract: We develop an equilibrium model of on-the-job search with ex-ante heterogeneous workers and firms, aggregate uncertainty and vacancy creation. The model produces rich dynamics in which the distributions of unemployed workers, vacancies and worker-firm matches evolve stochastically over time. We prove that the surplus function, which fully characterizes the match value and the mobility decision of workers, does not depend on these distributions. We estimate the model on US labor market data from 1951-2007 and predict the fit for 2008-12. We use the model to measure the cyclicality of mismatch between workers and jobs.
    Keywords: On-the-job search; Heterogeneity; Aggregate fluctuations; Mismatch
    JEL: E24 E32 J63 J64
    Date: 2013–09
  6. By: Kamei, Keita
    Abstract: In this paper, we construct a simplified general oligopolistic equilibrium (GOLE) model, in which Smith's (1776) famous theory of division of labor is embedded. In the absence of labor market integration with trading countries, we show that trade liberalization promotes a reduction of the number of firms in each country and a deeper division of labor, thus increasing firm productivity and improving welfare. Our model suggests a new interpretation of the trade-induced firm productivity effect.
    Keywords: Trade Liberalization; Division of Labor; Firm Productivity; Cournot Competition; General Oligopolistic Equilibrium (GOLE)
    JEL: F1 F12 F16 L1 L16
    Date: 2013–09–30
  7. By: Domenico Depalo (Bank of Italy); Francesca Lotti (Bank of Italy)
    Abstract: Many empirical analyses find that the performance of firms headed by women (female firms) varies with respect to those headed by men and that the greatest part of this gap is due to observable characteristics (i.e. gender) related to firms’ characteristics. In this paper we evaluate whether this finding also holds for Italy in terms of productivity and returns.The classification of firms by gender follows that prescribed in Law 215/92; for the purposes of this paper only partnerships and private and public corporations were considered, the sole legal forms for which balance sheets are available. Whilst male firms operate in almost all sectors, female firms tend to cluster in those areas where interpersonal relations are most important, namely the retail sector, restaurants, hotels etc.. In terms of performance, measured by profitability and productivity (and even when controlling by sector and company size), there do not appear to be any significant differences between male and female enterprises.
    Keywords: female entrepreneurship, gender economic differences
    JEL: J1 L11 L25
    Date: 2013–06
  8. By: Daphne Nicolitsas (Bank of Greece)
    Abstract: The paper documents the price setting practices followed by some 400 or so firms operating in Greece. Survey replies reveal: a low percentage of firms changing prices with frequency higher than annual; staggering of price changes during the year; sluggish adjustment of prices to cost shocks; asymmetries in price adjustment across positive and negative cost shocks and a speedier adjustment to increases in costs than to reductions in demand. The data confirm cross-sectional variations in price setting practices also found for other countries. On the basis of the results reached the conjecture that the prevalence of small firms, of firms providing services to businesses and of firms active in tourism-related activities might lie behind the inflation persistence exhibited until recently in Greece appears plausible.
    Keywords: price setting; competition; survey data
    JEL: E31 C41 J31 J41
    Date: 2013–04
  9. By: Murray, Cameron
    Abstract: Neoclassical theory erroneously makes the assumption that firms maximise profits on a fixed endowment of physical capital leading to the pervasive rule of thumb that firms produce at a level of output where marginal revenues equal marginal costs. However this is merely a special case of the general goal of firms maximising returns on all costs. Firms adopting a return-seeking strategy make decisions that are consistent with fundamental assumptions of financial analysis and outperform profit maximising firms. Introducing time and a measure of incremental capital unit into the model overcomes many limitations with mainstream analysis, particularly in relation to capital investment decisions. This new framework provides a more general model with which to consider market interactions and allows for observable pricing mechanisms, such as mark-up pricing, downward sloping cost curves at the firm level, and ignorance of marginal costs by firm managers. It also reveals that the leap between the positive descriptive model and the normative welfare implications of markets outcomes cannot be bridged by the fundamental welfare theorems.
    Keywords: Firm behaviour, pricing, return, profit, capital investment
    JEL: D0 D2 D20 D21
    Date: 2013–09–30

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