nep-bec New Economics Papers
on Business Economics
Issue of 2014‒03‒30
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Network externalities between carriers or machines:How they work in the smartphone industry By Ryoma Kitamura
  2. Which Governance Characteristics Affect the Incidence of Divestitures in Australia? By Pascal Nguyen; Nahid Rahman
  3. Private environmental governance through cross-sector partnerships: Tensions between competition and effectiveness By Tobias Hahn; Jonatan Pinkse
  4. Strategic Transfer Pricing and Intensity of Competition By Nathan Berg; Chun-Yu Chen; Barry J. Seldon
  5. Cross-Functional Knowledge Integration, Patenting and Firm’s Performance By Marco MC Ceccagnoli; Nicolas van Zeebroeck; Roberto Venturini
  6. Is Export Diversification good for Profitability? First Evidence for Manufacturing Enterprises in Germany By Joachim Wagner
  7. Unintended Consequences of Products Liability: Evidence from the Pharmaceutical Market By Eric Helland; Darius Lakdawalla; Anup Malani; Seth A. Seabury
  8. CEO compensation and topmanagement incentives. Internal or social problems ? By Frédéric TEULON
  9. Intinsically Motivated Agents: Blessing or Curse for Firms ? By Ester Manna
  10. Female Employment and Firm Performance: An empirical analysis using firm panel data (Japanese) By YAMAMOTO Isamu
  11. A caring interpretation of stakeholder management for the social enterprise. Evidence from a regional survey of micro social cooperatives in the Italian welfare mix By Lorenzo Dorigo; Giuseppe Marcon
  12. SMEs and Barriers to Eco-Innovation in EU: A Diverse Palette of Greens By Marin,Giovanni; Marzucchi,Alberto; Zoboli,Roberto
  13. Accounting in Agriculture: Disclosure practices of listed firms By Rute Gonçalves; Patrícia Lopes
  14. Business models: A challenging agenda By Charles Baden-Fuller; Vincent Mangematin

  1. By: Ryoma Kitamura (Graduate School of Economics, Kwansei Gakuin University)
    Abstract: In this paper, we consider a duopoly model where two firms sell two differentiated products and there is a network externality between either carriers or machines. We derive the equilibria of these games and illustrate the effects of a change in quality on the equilibrium quantity of each good. Furthermore, we compare fully compatible and incompatible equilibrium outcomes and discover some insights on relations between them. Such insights were not found in earlier studies that considered only the network externality between carriers.
    Keywords: Smartphone market, Multi-product firm, Duopoly, Cannibalization, Network externality
    JEL: D21 D43 L13 L15
    Date: 2014–03
  2. By: Pascal Nguyen (Finance Discipline Group, UTS Business School, University of Technology, Sydney); Nahid Rahman (Finance Discipline Group, UTS Business School, University of Technology, Sydney)
    Abstract: Event studies indicate that divestitures create shareholder value. However, managers are generally disinclined to execute a divestiture due to their inherent preferences for growing the firm’s assets. Governance structures can play a significant role in restraining this agency conflict. Using a sample of divestitures carried out by Australian firms over a recent 10-year period, we find that board compensation and ownership concentration increase the likelihood of a divestiture. In addition, board compensation has a stronger effect in firms that are more likely to divest, while larger boards inhibit divestitures in firms that are less likely to divest. Our analysis involves a propensity score matching method. We show that poor matching can lead to large biases and inconsistencies.
    Keywords: divestitures; restructuring; corporate governance; agency conflicts; propensity score matching
    JEL: G34
    Date: 2014–01–01
  3. By: Tobias Hahn (Kedge Business School - Kedge Business School, France); Jonatan Pinkse (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM))
    Abstract: We analyze the suitability of cross-sector partnerships as an effective mechanism for private environmental governance. By focusing on the interaction between firms within cross-sector partnerships, we analyze how competition between firms affects partnership effectiveness. Marrying insights from the private governance literature with institutional theory and the resource-based view, we identify under which conditions firm-level competition for legitimacy and capabilities, respectively, undermines or enhances effectiveness of cross-sector partnerships to address environmental issues. In doing so, our argument develops the various factors that moderate the relationship between competition and effectiveness for different types of partnerships. We contend that the effectiveness of cross-sector partnerships for governing global environmental issues depends considerably on whether competitive forces at the firm level are aligned with the collective benefits of partnerships. We discuss the consequences for designing effective cross-sector partnerships as well as the implications of a firm perspective on private governance.
    Date: 2014
  4. By: Nathan Berg (Department of Economics, University of Otago, New Zealand); Chun-Yu Chen (Department of Economics, University of Texas–Dallas); Barry J. Seldon (Florida State University, Republic of Panama)
    Abstract: Our model describes optimal transfer prices as a function of the number of multi-divisional firms. Decentralized firms imperfectly observe downstream pricing and quantity decisions. Therefore, transfer prices have two strategic functions requiring a trade-off: limiting affiliated downstream divisions' discounting and production, and making credible threats to induce soft responses from competitors. Depending on which motive dominates (i.e., number of competitors, external upstream markets, and ability to keep "two sets of books"), optimal transfer prices switch from above-marginal-cost to below. The model describes how entry affects equilibrium transfer price, output and profits while causing non-monotonic and discontinuous inter-firm upstream trade flows.
    Keywords: multi-national, multi-divisional, divisionalized, integrated firm, number, competitors, internal, external, market
    JEL: L22
    Date: 2014–03
  5. By: Marco MC Ceccagnoli; Nicolas van Zeebroeck; Roberto Venturini
    Abstract: Cross-functional knowledge integration and patenting are both reckoned to increase the productivity of human capital and the profitability of the firms implementing them. The combined effect of a joint use is in many ways ambiguous since those practices pursue different objectives in terms of managing the flow of information within the firm's boundaries. The presence of knowledge spillovers in situations of high technological rivalry could deteriorate the positive impact of knowledge integration. We investigate empirically different channels of interactions between patenting and knowledge integration and we find that they are substitutes in terms of economic profitability; consistently with our theory, the effect is exacerbated by high technological rivalry and scarce effectiveness of secrecy. Our empirical analysis is conducted using a cross-section database with detailed firm-level information on U.S. manufacturing firms.
    Keywords: R&D, Performance, Knowledge Integration, Patents, Spillovers
    Date: 2013
  6. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper uses a tailor-made newly available data set for enterprises from manufacturing industries in Germany to investigate for the first time the links between export diversification over destination countries and goods on the one hand and the profitability of the exporting firms on the other hand. We find that profits tend to be larger in firms with less diversified export sales over goods and in firms with more diversified export sales over destination countries.
    Keywords: Exports, Exports, diversification, profitability, Germany
    JEL: F14
    Date: 2014–03
  7. By: Eric Helland; Darius Lakdawalla; Anup Malani; Seth A. Seabury
    Abstract: In a complex economy, production is vertical and crosses jurisdictional lines. Goods are often produced by an upstream national or global firm and improved or distributed by local firms downstream. In this context, heightened products liability may have unintended consequences on product sales and consumer safety. Conventional wisdom holds that an increase in tort liability on the upstream firm will cause that firm to (weakly) increase investment in safety or disclosure. However, this may fail in the real-world, where upstream firms operate in many jurisdictions, so that the actions of a single jurisdiction may not be significant enough to influence upstream firm behavior. Even worse, if liability is shared between upstream and downstream firms, higher upstream liability may mechanically decrease liability of the downstream distributor and encourage more reckless behavior by the downstream firm. In this manner, higher upstream liability may perversely increase the sales of a risky good. We demonstrate this phenomenon in the context of the pharmaceutical market. We show that higher products liability on upstream pharmaceutical manufacturers reduces the liability faced by downstream doctors, who respond by prescribing more drugs than before.
    JEL: H7 I1 I11 K13
    Date: 2014–03
  8. By: Frédéric TEULON
    Abstract: This paper analyzes the income of french top managers taking as a sample firms that made the CAC 40 in 2009. The pay gap between CEOs and unskilled workers have never been higher. In our view, explanations of this trend are not solely related to economic causes (transformation of the labor market, failure of control systems…), they also result from transformation of the ruling classes and from the modification of their place in the society (loss of morality, inbreeding, collusion public/private). We must return to principles of common sense (an incentive payment but not abusive) in a societal perspective. Different solutions are presented and discussed
    Keywords: Agency problem, CEO compensation, Corporate governance, Top-management incentives, Rent seeking
    Date: 2014–02–25
  9. By: Ester Manna
    Abstract: I investigate whether the presence of intrinsically motivated agents benefits firms in a competitiveenvironment. I find that firms may obtain higher profits by hiring self-interested agents than byhiring motivated agents. This is because the agents’ intrinsic motivation has counteracting effectson the profits obtained by the firms. On the one hand, motivation has a positive impact on theprofits due to a reduction of wages. Motivated employees provide a given level of quality for a lowerwage. On the other hand, motivation has a negative impact on each firm’s profits. The agents’intrinsic motivation has a positive impact on the quality offered by the firms. With higher quality,the degree of differentiation of the products is relatively less important, increasing competition andreducing prices. Firms find themselves trapped in a prisoner’s dilemma in which the strategy ofhiring self-interested agents is strictly dominated by that of hiring motivated agents. Hence, thevery presence of motivated agents may hurt firms.
    Keywords: spatial competition; intrinsically motivated agents; prisoner's dilemma
    JEL: D30 D21 L13
    Date: 2013–10
  10. By: YAMAMOTO Isamu
    Abstract: This paper overviews the situation of female employment in listed Japanese companies using firm-level panel data after the 2000s, and demonstrates whether those companies utilizing female employment earn higher profits. The estimation results of fixed effect models show that a higher female proportion among regular employees significantly raises a company's profit rates, as measured by the return on assets. Particularly, it is shown that those firms with a female proportion of 30% to 40%, as well as with a higher female proportion among employees in their 30s, tend to earn higher profits with all things equal. In addition, those firms with better work-life balance practices or higher turnover rates have higher profit rates. Although the female proportion among managerial employees has no effect on company profit, medium-sized companies or those with a higher retention rate of newly hired female college graduates tend to see positive effects of higher female manager proportions. These results imply that higher female proportions could increase a company's profit not only by the reduced personnel cost explained by Becker's discrimination theory but also by the increased productivity due to the utilization of female workers' higher ability and skills.
    Date: 2014–03
  11. By: Lorenzo Dorigo (Dept. of Management, Università Ca' Foscari Venice); Giuseppe Marcon (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: The stakeholder literature on the social enterprise is still a nascent and largely under investigated field of knowledge. This literature is characterized by the existence of two persistently divergent theorizings, broadly, the ÔcorporateÕ and the Ôsocio-politicalÕ approach. We assume that the reason of this divergence lies in the absence of proper moral justifications underpinning the notion of stakeholder legitimacy, which results in devaluations and misinterpretations of the normative foundations of stakeholder management. In order to bridge this gap, we propose to conceive of the two theorizings as if they were empirical streams of research of a common normative framework of stakeholder thought. A special focus is given to the feminist theory, and, especially, to the Ôethics of careÕ (Gilligan 1982, Noddings 1984, 1999; Held, 2003), as meaningful moral grounding for advancing descriptions and managerial interpretations of the particular nature and functions of firm stakeholder relationships in social enterprises. To the purpose, we draw from the specialized literature on caring both insights and criteria of an ideal architecture of firm as Ôcaring organizationÕ (Liedtka, 1996), in order to offer an operationally meaningful conceptualization of how social enterprises might simultaneously enhance both the effectiveness and the moral quality of stakeholder management. Then, we test these assumptions on a regional survey of micro social co operatives in the Italian welfare mix. Findings reveal that the caring for attribute of ÔproximityÕ shaping firm stakeholder relationships offers a lot of useful insights to conceive of caring as suitable moral grounding for a common stakeholder theorizing of social enterprise.
    Keywords: care management, stakeholder theory, social enterprise, feminis ttheory, stakeholder involvement
    JEL: M14 M29 B54
    Date: 2014–02
  12. By: Marin,Giovanni; Marzucchi,Alberto; Zoboli,Roberto
    Abstract: Eco-innovation is an explicit aim of major EU policy strategies. Many environmental policy de facto require firms to eco-innovate to comply with policy requirements, while the overlap between policy-driven and market-driven eco-innovation strategies is increasingly important for many firms. Barriers to eco-innovation can then emerge as a critical factor in either preventing or stimulating EU strategies, policy implementation, and 'green strategies' by firms. In this paper, we propose a taxonomy of EU SMEs in terms of barriers to eco-innovation. The aim is to discriminate among SMEs on how they differ in terms of perception of barriers and engagement in environmental innovation, thus highlighting the need to look at eco-innovation barriers in relation to firms' attitudes, technological and organizational capabilities, and strategies. We identify six clusters of SMEs. These clusters include firms facing 'Revealed barriers', 'Deterring barriers', 'Cost deterred' firms, 'Market deterred' firms, 'Non eco-innovators' and 'Green champions'. The clusters show substantial differences in terms of eco-innovation adoption. We show that our proposed taxonomy has little overlap with sector classifications. This diversity should be taken into account for successful environmental innovation policies.
    Keywords: eco-innovation, Barriers to innovation, firm behaviour
    JEL: O33 Q55
    Date: 2014–03–24
  13. By: Rute Gonçalves (School of Economics and Management, University of Porto); Patrícia Lopes (School of Economics and Management, University of Porto)
    Abstract: This paper analyzes accounting in agriculture under the International Accounting Standard (IAS) 41 – Agriculture of 270 listed firms worldwide that have adopted International Financial Reporting Standards (IFRS) until 2010. Previous empirical evidence on the implementation of this standard is still very scarce. In general it shows that the disclosure level is low and that comparability is missing. In order to extend previous research on disclosure practices under the IAS 41, an index of the disclosure of biological assets is constructed and calculated based in the 2011 annual report. This paper tests several hypotheses relating the index and firm-level determinants - biological assets intensity, ownership concentration, firm size, auditor type, internationalization level, listing status, profitability and sector – and country-level determinant - legal status. This variable is measured using two different proxies, following institutional country classification, namely the dichotomy common law versus code law countries and cluster classification (Leuz, 2010). It was found that the mandatory and voluntary disclosure of biological assets is influenced by biological assets intensity, ownership concentration, firm size, sector and legal status. This paper seeks to help standard setters to better understand disclosure practices and their determinants concerning biological assets, and to develop future projects on this issue.
    Keywords: biological assets, disclosure index, financial reporting, regulation
    JEL: M41
    Date: 2014–03
  14. By: Charles Baden-Fuller (Cass Business School - Cass Business School); Vincent Mangematin (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM))
    Abstract: The current literature on business models lies mainly in the literature on strategy and competitive advantage and focuses on their role as descriptors of actual phenomenon, often by reference to taxonomic categories. In this essay we explore how business models can be seen as a set of cognitive configurations that can be manipulable in the minds of managers (and academics). By proposing a typology of business models, that emphasises the connecting of traditional value chain descriptors with how customers are identified and satisfied, and how the firm monetizes its value, we explore how business model configurations can extend current work on cognitive categorization and open up new possibilities for organisation research.
    Date: 2013

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