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on Business Economics |
| By: | Mella-Barral , Pierre; Habib, Michel A.; Hege, Ulrich |
| Abstract: | We analyze the implications of the decision to spawn or to retain a new product for the nature and evolution of the firm. In our model, a new product is spawned if the fit between the product and its parent firm organization is not adequate. We focus on the impact of the firm's history of spawning decisions on firm characteristics such as size, focus, profitability, and innovativeness, and analyze its role in shaping firm dynamics. In accordance with the empirical literature, our model predicts that older firms innovate less, spawn less, are more diversified and less profitable, and that firms with more valuable general or specialized resources innovate and spawn more. Echoing seemingly contradictory empirical findings, our model predicts that small, focused firms (large, diversified firms) innovate and spawn more, and are more profitable when sample heterogeneity is driven by the importance of organizational fit (the value of general resources) |
| Keywords: | spawning; spinoffs; spinouts; general and specialized resources; firm organization; organizational fit; firm size; focus; profitability; innovativeness; spawning dynamics |
| JEL: | L25 M13 O31 O33 |
| Date: | 2013–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:0984&r=bec |
| By: | Paige Ouimet; Rebecca Zarutskie |
| Abstract: | Young firms disproportionately employ young workers, controlling for firm size, industry, geography and time. The same positive correlation between young firms and young employees holds when we look just at new hires. On average, young employees in young firms earn higher wages than young employees in older firms. Further, young employees disproportionately join young firms with greater innovation potential and that exhibit higher growth, conditional on survival. These facts are consistent with the argument that the skills, risk tolerance, and career dynamics of young workers are contributing factors to their disproportionate share of employment in young firms. Finally, we show that an increase in the regional supply of young workers is positively related to the rate of new firm creation, especially in high tech industries, suggesting a causal link between the supply of young workers and new firm creation. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2013-75&r=bec |
| By: | Dominika Langenmayr (University of Munich); Andreas Hau fler (University of Munich and CESifo); Christian J. Bauer (University of Munich and CESifo) |
| Abstract: | Heterogeneous firm productivity raises the question of whether governments should pursue `pick-the-winner' strategies by subsidizing highly productive firms more, or taxing them less, than their less productive counterparts. We study this issue in a setting where governments can set differentiated effective tax rates in an oligopolistic industry where firms with two productivity levels co-exist. We show that the optimal structure of tax differentiation depends critically on the feasible level of the corporate profit tax, which in turn depends on the degree of international tax competition. When tax competition is weak and optimal profit tax rates are high, favouring high-productivity firms is indeed the optimal policy. When tax competition is aggressive and profit taxes are low, however, the optimal tax policy reverses and favours low-productivity firms. |
| Keywords: | business taxation, firm heterogeneity, tax competition |
| JEL: | H25 H87 F15 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1308&r=bec |
| By: | Kurt A. Desender; Mircea Epure |
| Abstract: | By integrating the agency and stakeholder perspectives, this study aims to provide a systematic understanding of the firm- and institutional-level corporate governance factors that affect corporate social performance (CSP). We analyze a large global panel dataset and reveal that CSP is positively associated with board independence, but negatively with ownership concentration. These results underscore the idea that the benefits of CSP do not flow to shareholders to the same extent as the costs and that the allocation of resources to CSP is lower when shareholders are powerful. Furthermore, these findings indicate that independent directors should be understood as agents in their own right, not only focused on defending shareholder interests. We also find that CSP is negatively related to investor protection and shareholder-oriented environments, while it is positively related to egalitarian environments. Finally, we jointly analyze firm-level drivers and institutional contexts. |
| Keywords: | corporate social performance, corporate governance, agency theory, stakeholder theory |
| JEL: | A13 G3 M0 M1 M14 M4 M41 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:730&r=bec |
| By: | Maria Bas (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Pamela Bombarda (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise) |
| Abstract: | A unilateral trade reform generates two opposite effects: market access expansion and strengthening of competitive pressures in the liberalized market. Using detailed trade and firm-level data from France, we investigate how French firms' product scope and export sales changed after Chinese liberalization vis-à-vis Asian liberalization. Our findings suggest that lower Chinese import tariffs account on average for 7 percent of the new products exported by French firms, and for 18 percent of additional French export sales. These results are robust when accounting for foreign competition faced by French firms in the liberalized market. |
| Keywords: | unilateral trade liberalization, market access, foreign competition, export margins and firm level data |
| Date: | 2013–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00874946&r=bec |
| By: | Frank Jr. , Douglas H.; Obloj , Tomasz |
| Abstract: | This paper explores conflicting implications of firm-specific human capital (FSHC) for firm performance. Existing theory predicts a productivity effect that can be enhanced with strong incentives. We propose an offsetting agency effect: FSHC may facilitate more sophisticated “gaming” of incentives, to the detriment of firm performance. Using a unique dataset from a multiunit retail bank, we document both effects and estimate their net impact. Managers with superior FSHC are more productive in selling loans but are also more likely to manipulate loan terms to increase incentive payouts. We find that resulting profits are two percentage points lower for high-FSHC managers. Finally, profit losses increase more rapidly for high-FSHC managers, indicating adverse learning. Our results suggest that FSHC can create agency costs that outweigh its productive benefits. |
| Keywords: | FSHC; firm-specific human capital; firm performance; incentives; multiunit retail bank |
| JEL: | G00 |
| Date: | 2013–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:0999&r=bec |
| By: | Luigi Paciello (EIEF and CEPR); Andrea Pozzi (EIEF and CEPR); Nicholas Trachter (Federal Reserve Bank of Richmond) |
| Abstract: | We study a model where customers face frictions when changing their supplier, generating sluggishness in the firm's customer base. Firms care about retaining customers and this affects their pricing strategy. We characterize optimal pricing in this model and estimate it using data on the evolution of the customer base of a large US retailer. The introduction of customer retention concerns reduces markups, more markedly for less productive firms. We show that our model delivers pro-cyclical markups, as well as heterogeneous pass-through of cost shocks. These results help explaining recent empirical evidence. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:eie:wpaper:1328&r=bec |
| By: | Chanson, Guillaume; Quélin , Bertrand V. |
| Abstract: | This paper is devoted to the pattern of activity within large companies, through the two criteria of decentralization and contracting out. Our goal is to understand whether the determinants are identical for both internal and external boundaries of the firm. One literature stream contributes to the analysis of the internal structure and organization of divisional companies, studying the functions assigned to headquarters or divisions. Another part of the literature has focused on the boundaries of the firm issues and the firm’s core activities. Few works are at the junction of these two traditions. This study builds on an empirical study dedicated to the book publishing industry. Our analysis leads to discuss determinants of internal and external borders. We show that functions or activities with high potential of economies of scale are mainly centralized and internalized. On reverse, those related to core business and non-programmable functions are mostly at divisional level and contracted out. |
| Keywords: | Boundaries of the firm; Centralization; Contracting out; Central services |
| JEL: | G00 |
| Date: | 2013–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:0990&r=bec |
| By: | Timothy Dunne; Shawn D. Klimek; Mark J. Roberts; Daniel Yi Xu |
| Abstract: | This paper estimates a dynamic, structural model of entry and exit in an oligopolistic industry and uses it to quantify the determinants of market structure and long-run firm values for two U.S. service industries, dentists and chiropractors. Entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are all found to be important determinants of long-run firm values, firm turnover, and market structure. Estimates for the dentist industry allow the entry cost to differ for geographic markets that were designated as Health Professional Shortage Areas and in which entry was subsidized. The estimated mean entry cost is 11 percent lower in these markets. Using simulations, we compare entry-cost versus fixed-cost subsidies and find that entry-cost subsidies are less expensive per additional firm. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2013-10&r=bec |