nep-bec New Economics Papers
on Business Economics
Issue of 2013‒11‒22
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Global sourcing and firm selection By Kohler, Wilhelm; Smolka, Marcel
  2. Entry and markup dynamics in an estimated business cycle model. By Lewis, Vivien; Stevens, Arnoud
  3. Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy By Cosar, A. Kerem; Guner, Nezih; Tybout, James
  4. What types of firms tend to be more innovative: A study on Germany By Stephan Brunow; Valentina Nafts
  5. Reducing Moral Hazard in Employment Relationships: Experimental Evidence on Managerial Control and Performance Pay By C. Kirabo Jackson; Henry S. Schneider
  6. Carry-along trade. By Bernard, Andrew B; Blanchard, Emily J; Van Beveren, Ilke; Vandenbussche, Hylke
  7. Natural disasters and firms in Vietnam By Vu, Tam Bang; Noy, Ilan
  8. Large shareholders and value creation through corporate acquisitions in Europe: The identity of the controlling shareholder matters. By Craninckx, Katrien; Huyghebaert, Nancy
  9. Skilled Immigration and the Employment Structures of U.S. Firms By Sari Pekkala Kerr; William R. Kerr; William F. Lincoln
  10. Does Apprenticeship Improve Job Opportunities? A Regression Discontinuity Approach By Picchio, Matteo; Staffolani, Stefano
  11. Organizing sustainable democratic firms: processes of regeneration as the design of new models of cooperation By Sébastien Gand; Mathias Béjean

  1. By: Kohler, Wilhelm; Smolka, Marcel
    Abstract: Which firms find it optimal to integrate their input suppliers into the firm boundaries of control (vertical integration)? Which firms choose to expand their sourcing activities across the national border (offshoring)? This letter provides novel evidence on these questions based on a Spanish firm-level data set. We find that firms selecting into strategies of vertical integration and of offshoring tend to have been more productive ex ante than firms choosing not to do so. This finding is in line with the recent heterogeneous-firm literature on input sourcing under incomplete contracts. --
    Keywords: vertical integration,offshoring,firm selection,firm productivity
    JEL: F14 F23 L22 L23
    Date: 2013
  2. By: Lewis, Vivien; Stevens, Arnoud
    Abstract: How do changes in market structure affect the US business cycle? We estimate a monetary DSGE model with endogenous firm/product entry and a translog expenditure function by Bayesian methods. The dynamics of net business formation allow us to identify the extent to which desired price markups and inflation decrease when entry rises. We find that a 1 percent increase in the number of competitors lowers desired markups by 0.17 percent. While markup fluctuations due to sticky prices or exogenous shocks account for a large proportion of US inflation variability, endogenous changes in desired markups also play a non-negligible role.
    Date: 2013–10
  3. By: Cosar, A. Kerem (University of Chicago Booth School of Business); Guner, Nezih (MOVE, Barcelona); Tybout, James (Pennsylvania State University)
    Abstract: This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows in a new way. The fitted model captures key features of Colombian firm dynamics and labor market outcomes, as well changes in these features during the past 25 years. Counterfactual experiments imply that integration with global product markets has increased both average income and job turnover in Colombia. In contrast, the experiments find little role for this country's labor market reforms in driving these variables. The results speak more generally to the effects of globalization on labor markets in Latin America and elsewhere.
    Keywords: international trade, firm dynamics, size distribution, labor market frictions, inequality
    JEL: F12 F16 E24 J64 L11
    Date: 2013–11
  4. By: Stephan Brunow (Institute for Employment Research (IAB)); Valentina Nafts (Institute for Employment Research (IAB))
    Abstract: Innovation is a key driver of technological progress and growth in a knowledge-based economy. There are various motives for individual firms to innovate: improving quality secures market leadership, introducing new products leads the firm into new markets, adopting new technologies could be seen as a catch-up strategy within an industry or an improvement of the firm’s own products when the technology adopted is based on ideas from other industries. Firms can perform innovation activities in one or more of these areas or in none of them. We therefore raise the question of what types of firms tend to be more innovative, i.e. which firms innovate in more of these areas. For this purpose we employ firm-level survey data and combine it with administrative data from Germany’s social security system. An ordered logit model is estimated using a variety of characteristics which describe the workforce employed and other firm-related variables, the regional environment where the firm is located, as well as industry and region fixed effects.
    Keywords: firm innovation, labor diversity, ordered logit
    JEL: J44 O31 R12
    Date: 2013–11
  5. By: C. Kirabo Jackson; Henry S. Schneider
    Abstract: Moral hazard is endemic to employment relationships and firms often use performance pay and managerial control to address this problem. While performance pay has received much empirical attention, managerial control has not. We analyze data from a managerial-control field experiment in which an auto-repair firm provided detailed checklists to mechanics and monitored their use. Revenue was 20 percent higher under the experiment. We compare this effect to that of quasi-experimental increases in mechanic commission rates. The managerial-control effect is equivalent to that of a 10 percent commission increase. We find evidence of complementarities between the two, suggesting benefits from an all-of-the-above approach. We also find evidence of incentive gaming under performance pay.
    JEL: D0 D82 D86 H0 J0 J33 J41
    Date: 2013–11
  6. By: Bernard, Andrew B; Blanchard, Emily J; Van Beveren, Ilke; Vandenbussche, Hylke
    Abstract: Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models. Using linked production and export data at the firm-product level, we find that the overwhelming majority of manufacturing firms export products that they do not produce. Three quarters of the exported products and thirty percent of export value from Belgian manufacturers are in goods that are not produced by the firm, so-called Carry-Along Trade (CAT). The shares of CAT products and CAT exports are strongly increasing in firm productivity leading CAT exports to be concentrated in the largest and most productive firms. We develop a general model of Carry-Along Trade and examine the conditions under which it can rationalize the patterns observed in the data.
    Date: 2012
  7. By: Vu, Tam Bang; Noy, Ilan
    Abstract: This paper investigates the consequences of natural disasters on firms in Vietnam over the period 2000 to 2008. We examine the impacts of natural disasters on firm investment and retail sales. We find evidence of adverse effects of disasters on retail sales accompanied by an increase in firm investment of very similar magnitude. There are important differences across geographical units, with the positive impact on investment unique to large cities and provinces with large urban concentrations. We find that more remote rural areas, especially in the North, experience declines in sales without the mitigating boost to investment in disasters’ aftermath. We also show that the decline in sales is not apparently associated with declines in household incomes.
    Keywords: Vietnam, Natural disasters, Investment, Recovery, Retail sales,
    Date: 2013
  8. By: Craninckx, Katrien; Huyghebaert, Nancy
    Abstract: This paper examines the impact of large acquirer shareholders on M&A value effects for 342 European takeovers completed in 1997–2007. Family-controlled firms on average generate more positive M&A value effects than other firms. Market participants thus seem to appreciate the long-term investment horizon typically held by controlling families in European listed firms. Interestingly, we show that this positive family effect is not related to a more efficient monitoring of management, since family owners cannot curb the negative association between managerial hubris and M&A value effects. In addition, the positive family effect disappears in industry-diversifying acquisitions, which implies that family owners in Europe may use corporate diversification to pursue diversification of the family wealth. Large institutional owners can curb managerial hubris, yet acquirers controlled by institutional block holders can never outperform family-controlled acquirers
    Date: 2013
  9. By: Sari Pekkala Kerr (Wellesley College); William R. Kerr (Harvard Business School, Entrepreneurial Management Unit); William F. Lincoln (John Hopkins University)
    Abstract: We study the impact of skilled immigrants on the employment structures of U.S. firms using matched employer-employee data. Unlike most previous work, we use the firm as the lens of analysis to account for a greater level of heterogeneity and the fact that many skilled immigrant admissions are driven by firms themselves (e.g., the H-1B visa). OLS and IV specifications find rising overall employment of skilled workers with increased skilled immigrant employment by firm. Employment expansion is greater for younger natives than their older counterparts, and departure rates for older workers appear higher for those in STEM occupations compared to younger worker.
    Keywords: Immigration, Employment, Firms, Age, Scientists, Engineers, Inventors, H-1B.
    JEL: F15 F22 J44 J61 O31
    Date: 2013–11
  10. By: Picchio, Matteo (Università Politecnica delle Marche, Ancona); Staffolani, Stefano (Marche Polytechnic University)
    Abstract: In Italy the reforms of the last twenty years shaped a dual labour market with different levels of employment protection for permanent jobs, on one side, and temporary jobs like apprenticeships and fixed-term contracts, on the other side. The main difference between apprentices and other types of temporary workers is that the former should receive firm-provided training. The firm incentive in hiring apprentices consists in the possibility to pay lower wages and in a reduction in labour taxes. Using an Italian administrative longitudinal dataset containing information on all the job contracts started between January 2009 and June 2012, we estimate hazard functions towards permanent jobs and contrast the ones of apprentices with those of other types of temporary workers. The hazard function estimates based on a regression discontinuity approach affirm that apprenticeships are sorts of "long entrance halls" towards open-ended contracts, especially within the same firm where the apprenticeship was performed.
    Keywords: apprenticeship, temporary work, permanent work, regression discontinuity, hazard function
    JEL: C36 C41 J24 J41
    Date: 2013–11
  11. By: Sébastien Gand (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Mathias Béjean (Université Paris-Est - Université Paris-Est)
    Abstract: In a period of economic and legitimacy crises for firms, there is a current appeal on alternative firms to the conventional capitalist and hierarchical one, especially ones with a democratic form such as cooperatives. But for a long time the "degeneration" pattern of democratic firms, namely their economic failure or the abandonment of democratic functioning, has been pointed out. Even if such a deterministic rationale has been contested, the main difficulty for democratic firms remains their capacity to overcome degeneration crises. This paper investigates this question through the case of a 400-member democratic professional service firm, studied during three years with an intervention research method. It shows how such a firm designed organizational outcomes to a twofold crisis of performance and governance. It contributes to a better understanding of the conditions of sustainability of democratic firms by emphasizing the possibility of designing new models of cooperation, which integrate various constraints and do not compromise between antagonist logics within the firm.
    Keywords: Corporate Democracy; Cooperation
    Date: 2013

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