nep-bec New Economics Papers
on Business Economics
Issue of 2014‒04‒18
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  2. What are we learning from business training and entrepreneurship evaluations around the developing world? By McKenzie, David; Woodruff, Christopher
  3. The Divergent Effects of Long-Term and Short-Term Entry Investments on Home Market Cartels By Daniel Cracau; Abdolkarim Sadrieh
  4. The development of the DDG-capability in firms: An evaluation of its impact on firm financial performance By Elisabetta Raguseo; Claudio Vitari
  5. Corporate governance and the nature of takeover resistance By Carline, Nicholas F.; Linn, Scott C.; Yadav, Pradeep K.
  6. Reframing outsourcing through social networks: evidence from Infocert's case study By Giovanni Vaia; Anna Moretti
  7. Which firms benefit more from being located in a Science and Technology Park? Empirical evidence for Spain By Angela, Vásquez-Urriago; Andrés, Barge-Gil; Aurelia, Modrego
  8. FDI Impact on Firm Performance in Enlarged Europe: Evidence from a Meta-Regression Analysis By Bruno, Randolph Luca; Cipollina, Maria
  9. Internationalization and Innovation of Firms: Evidence and Policy By Carlo Altomonte; Tommaso Aquilante; Gábor Békés; Gianmarco I. P. Ottaviano
  10. Agents of structural change. The role of firms and entrepreneurs in regional diversification By Frank Neffke; Matté Hartog; Ron Boschma; Martin Henning
  11. Tariff reductions and labor demand elasticities : evidence from Chinese firm-level data By Sato, Hitoshi; Zhu, Lianming
  12. The Uncertainty Multiplier and Business Cycles By Hikaru Saijo
  13. Don't Stop Me Now: Barriers to innovation and firm productivity By Alex Coad; Maria Savona; Gabriele Pellegrino

  1. By: Alves, Paulo; Couto, Eduardo; Francisco, Paulo
    Abstract: This essay analyses the relationship between corporate governance practices and Chief Executive Officer (CEO) wages from a sample of Portuguese listed companies over the period from 2002-2011. The relationship between CEO total compensation and shareholders return, firm characteristics, CEO characteristics, board of directors and shareholders characteristics is analysed. It is found that firm specific factors accounts for the majority of the variance in total CEO pay, while firm performance accounts for less than 5%. It is also found that the CEO characteristics, board of directors’ structures, and shareholders features are related with the CEO pay. The policy implications of these results are then derived.
    Keywords: Pay, performance, CEO, corporate governance, listed companies, Portugal
    JEL: G30 G32 J33 L22
    Date: 2014–04
  2. By: McKenzie, David (World Bank); Woodruff, Christopher (University of Warwick)
    Abstract: Business training programs are a popular policy option to try to improve the performance of enterprises around the world. The last few years have seen rapid growth in the number of evaluations of these programs in developing countries. We undertake a critical review of these studies with the goal of synthesizing the emerging lessons and understanding the limitations of the existing research and the areas in which more work is needed. We find that there is substantial heterogeneity in the length, content, and types of firms participating in the training programs evaluated. Many evaluations suffer from low statistical power, measure impacts only within a year of training, and experience problems with survey attrition and measurement of firm profits and revenues. Over these short time horizons, there are relatively modest impacts of training on survivorship of existing firms, but stronger evidence that training programs help prospective owners launch new businesses more quickly. Most studies find that existing firm owners implement some of the practices taught in training, but the magnitudes of these improvements in practices are often relatively modest. Few studies find significant impacts on profits or sales, although a couple of the studies with more statistical power have done so. Some studies have also found benefits to microfinance organizations of offering training. To date there is little evidence to help guide policymakers as to whether any impacts found come from trained firms competing away sales from other businesses versus through productivity improvements, and little evidence to guide the development of the provision of training at market prices. We conclude by summarizing some directions and key questions for future studies.
    Keywords: Business training; Consulting; Randomized experiments; Firm Productivity.
    Date: 2013
  3. By: Daniel Cracau (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Positive effects of multimarket activities on cooperation between firms are widely acknowledged. We study these effects in a setting with home market asymmetries as is typical for global competition. In our multimarket duopoly experiment each firm has a home market but may also enter the other firm's market. Without entry barriers, we observe a high level of mutual forbearance with firms serving their home markets exclusively. With short-term entry barriers, the competition rates decrease significantly, as expected. Surprisingly, with long-term entry barriers, firms exhibit higher levels of competition, entering each other's market more often. We conjecture that in the latter case, bearing the cost of entry is perceived as a signal for the intention to compete and has an adverse effect on cooperation.
    Keywords: Market Entry Barriers, Mutual Forbearance, Prisoner's Dilemma, Experimental Economics
    JEL: D4 L1
    Date: 2014–04
  4. By: Elisabetta Raguseo (Polito - Politecnico di Torino [Torino] - Politecnico di Torino); Claudio Vitari (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM))
    Abstract: We examine whether firms that develop the Digital Data Genesis dynamic capability show higher performance. Using detailed survey data on the capabilities developed by companies by the usage of digital data and firm financial performance of 96 firms, we find that the firms that develop the DDG dynamic capability have levels of ROA, ROS and revenue growth higher than others do. Our results provide one of the first empirical evidence on the direct link between DDG dynamic capability and firm financial performance
    Keywords: Digital Data Genesis; dynamic capabilities; Firm financial performance
    Date: 2013
  5. By: Carline, Nicholas F.; Linn, Scott C.; Yadav, Pradeep K.
    Abstract: We investigate the relation between corporate governance characteristics of hostile takeover targets and the choice to employ 'harmful' resistance that is not perceived as being motivated by shareholders' interests. We find that harmful resistance is associated with firms where managers have more pronounced ownership-based and age-related incentives for control, and directors have equity interests less aligned to stockholders. These firms also have less independent boards, are exposed to weaker discipline from outside blockholders, and are inferior performers. In the presence of harmful resistance, the market is less optimistic about the chances of bid completion, and there is a greater likelihood of managerial turnover. --
    Keywords: Takeover bid,Resistance,Corporate Governance,Stockholder returns,C.E.O. turnover
    JEL: G34
    Date: 2014
  6. By: Giovanni Vaia (Dept. of Management, Università Ca' Foscari Venice); Anna Moretti (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: In an over-connected world where ICTs dominate firms' development and evolution, outsourcing is an increasingly adopted practice by IT firms facing a third-generation of inter-firm interactions: after the IT and business processes' outsourcing, and then the offshore outsourcing, now we face a sourcing ecosystem tagged as human cloud, where the online work and virtual workers are the center of the new system. Notwithstanding some relevant contributions to the literature about IT outsourcing, still few is known about how coordination between client and supplier can achieve superior outcomes through the development of collaborative practices. In particular, the use of IT tools devoted to sociality as a coordination mechanism has been under-investigated. This research provides insights about how a company can change attitudes and behaviors of client and supplier thanks to an IT tool deputed to collaboration: the social collaboration system. Through an explorative case study, our paper provides two main contributions to the literature about IT outsourcing: i) we show how the adoption of a social collaboration system improves ITO governance and performance, providing further empirical evidence on the role of social mechanisms in ITO relationships; ii) we show how the introduction of a social collaboration system in outsourcing management can influence and change the building blocks of its life-cycle.
    Keywords: IT outsourcing, governance, social collaboration, relational view, outsourcing lifecycle
    JEL: L24 M55
    Date: 2014–04
  7. By: Angela, Vásquez-Urriago; Andrés, Barge-Gil; Aurelia, Modrego
    Abstract: The aim of this work is to analyse the heterogeneous effect of Science and Technology Parks (STPs) on firms’ innovation outcomes, contingent on firms’ size and innovation effort. Despite the worldwide diffusion of STPs and the increasing literature aimed at analyzing their effect on tenants’ performance, empirical evidence on the heterogeneous effect of STPs location on different firms is very scarce. We use information for a representative sample of 39,722 Spanish firms, 653 of them located on 22 of the 25 official Spanish STP. Results show, on the one hand, that firm size is negatively related to an STP location effect and, on the other, that only a small amount of internal innovation effort is required to achieve a very high return from park location. However, firms without innovation efforts do not benefit from a park location. Finally, as internal innovation efforts increase, the park effect reduces, but is still at a high level.
    Keywords: Science and Technology Parks, heterogeneous treatment effects, product innovation, firms’ internal innovation capabilities, size
    JEL: L25 O25 R53
    Date: 2014–04–07
  8. By: Bruno, Randolph Luca (University College London); Cipollina, Maria (University of Molise)
    Abstract: This paper combines, explains and summarizes recent findings from the empirical literature focusing on the FDI's effect on firms' performances by collecting all the relevant firm level quantitative studies to run a regression of regressions focused on Enlarged Europe. The results show that there exists a positive indirect impact of FDI on productivity and ultimately on economic growth in EU, but it is limited in magnitude. Moreover, the effect of FDI on growth is stronger for New EU Members after 2001.
    Keywords: firm performance, Enlarged Europe, meta-regression analysis
    JEL: C81 F23 O52
    Date: 2014–03
  9. By: Carlo Altomonte; Tommaso Aquilante; Gábor Békés; Gianmarco I. P. Ottaviano
    Abstract: We use a representative and cross-country comparable sample of manufacturing firms (EFIGE) to document patterns of interaction among firm-level internationalization, innovation and productivity across seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom). We find strong evidence of positive association among the three firm-level characteristics across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization because internationalization goes beyond export and because, in the medium-to-long term, internationalization is driven by innovation. We recommend coordination and integration of internationalization and innovation policies 'under one roof' at both the national and EU levels, and propose a bigger coordinating role for EU institutions.
    Keywords: Internationalization, innovation, firm-level data, exports, foreign direct investment, outsourcing
    JEL: F13 F23 O31 O38
    Date: 2014–04
  10. By: Frank Neffke; Matté Hartog; Ron Boschma; Martin Henning
    Abstract: Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or non-local firms and entrepreneurs create most novelty in a region? Using matched employer-employee data for the whole Swedish workforce, we determine how unrelated and therefore how novel the activities of different establishments are to a region’s industry mix. Up- and downsizing establishments cause large shifts in the local industry structure, but these shifts only occasionally require an expansion of local capabilities because the new activities are often related to existing local activities. Indeed, these incumbents tend to align their production with the local economy, deepening the region’s specialization. In contrast, structural change mostly originates via new establishments, especially those with non-local roots. Moreover, although entrepreneurs start businesses more often in activities unrelated to the existing regional economy, new establishments founded by existing firms survive in such activities more often, inducing longer-lasting changes in the region.
    Keywords: Structural change, entrepreneurship, diversification, relatedness, regions, resource-based view
    Date: 2014–04
  11. By: Sato, Hitoshi; Zhu, Lianming
    Abstract: International production fragmentation has been a global trend for decades, becoming especially important in Asia where the manufacturing process is fragmented into stages and dispersed around the region. This paper examines the effects of input and output tariff reductions on labor demand elasticities at the firm level. For this purpose, we consider a simple heterogenous firm model in which firms are allowed to export their products and to use imported intermediate inputs. The model predicts that only productive firms can use imported intermediate inputs (outsourcing) and tend to have larger constant-output labor demand elasticities. Input tariff reductions would lower the factor shares of labor for these productive firms and raise conditional labor demand elasticities further. We test these empirical predictions, constructing Chinese firm-level panel data over the 2000--2006 period. Controlling for potential tariff endogeneity by instruments, our empirical studies generally support these predictions.
    Keywords: China, Tariff, International trade, Labor market, Labor demand elasticities, Tariff reductions, Intermediate inputs
    JEL: F14 F16
    Date: 2014–03
  12. By: Hikaru Saijo
    Abstract: I study a business cycle model where agents learn about the state of the economy by accumulating captal. During recessions, agents invest less, abd this generates noisier estimates of macroeconomic conditions and an increase in uncertainty. The endogenous increase in aggregate uncertainty further reduces economic activity, which in turn leads to more uncertainty, and so on. Thus, through changes in uncertainty, learning gives rise to a multiplier effect that amplifies business cycles. I use the calibrated model to measure the size of this uncertainty multiplier.
    Date: 2013–11
  13. By: Alex Coad (SPRU, University of Sussex, UK); Maria Savona (SPRU, University of Sussex, UK); Gabriele Pellegrino (Barcelona Institute of Economics, University of Barcelona)
    Keywords: Barriers to innovation, labour productivity, quantile regressions, propensity score matching JEL Classification: C23, O31, O32, O33
    Date: 2014–04

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