nep-bec New Economics Papers
on Business Economics
Issue of 2014‒05‒09
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. What drives the volatility of firm level productivity in China ? By Luo, Xubei; Zhu, Nong
  2. Asymmetric spiders: Supplier heterogeneity and the organization of firms By Nowak, Verena; Schwarz, Christian; Suedekum, Jens
  3. Acquisition Premiums of Executive Compensation in China: a Matching View By Kang, Lili; Peng, Fei
  4. What does (or does not) determine persistent corporate high-growth ? By Stefano Bianchini; Giulio Bottazzi; Federico Tamagni
  5. Foreign Owners and Perceived Job Insecurity in Germany: Evidence from Linked Employer-Employee Data By Verena Dill; Uwe Jirjahn
  6. The Effect of Regional Entrepreneurship Culture on Economic Development - Evidence for Germany By Michael Fritsch; Michael Wyrwich
  7. Self-Selectivity in Firm’s Decision to Withdraw IPO: Bayesian Inference for Hazard Models of Bankruptcy with Feedback By Rong Chen; Re-Jin Guo; Ming Lin
  8. Gender Discrimination in Job Ads: Evidence from China By Peter Kuhn; Kailing Shen
  9. Price leadership and unequal market sharing: Collusion in experimental markets By Dijkstra, P.T.
  10. Corporate Governance, Product Market Competition and Debt Financing By Teodora Paligorova; Jun Yang
  11. Uncertain Costs and Vertical Differentiation in an Insurance Duopoly By Radoslav S. Raykov
  12. High-growth firms and innovation: an empirical analysis for Spanish firms By Segarra Blasco, Agustí, 1958-; Teruel, Mercedes
  13. The Dynamics of Technical and Business Networks in Industrial Clusters: Embeddedness, status or proximity? By Pierre-Alexandre Balland; José Antonio Belso-Martínez; Andrea Morrison
  14. Technology and costs in international competitiveness: from countries and sectors to firms By Giovanni Dosi; Marco Grazzi; Daniele Moschella

  1. By: Luo, Xubei; Zhu, Nong
    Abstract: The enterprise reforms of the 1990s profoundly changed the structure of the economy in China. With the deepening of market economy, the share of the state-owned and collective enterprises declined. Expansion and contraction, as well as establishment and closure, of firms became a common phenomenon. The level and volatility of firm productivity have become increasingly important aspects of the micro performance of the economy. This paper uses a firm-level data set collected annually by the National Bureau of Statistics of China in 1998-2007 to examine the role of different firm characteristics in productivity volatility. The paper measures productivity volatility at the firm level as the standard deviation of the annual growth rate of productivity. The main objectives are twofold: first, it examines the variation of productivity volatility across firms of different characteristics and their evolution over time; second, it investigates the sources of productivity volatility at the firm level in China. The results suggest that in general, productivity volatility at the firm level has declined over time in China. Among firms with different characteristics, large firms, old firms, foreign firms, and firms located in the coastal provinces are less volatile. Firm size and location are the two major factors that drive changes in productivity volatility, one in a positive way and one in a negative way. Although the gaps of volatility between smaller firms and larger firms declined, the gaps between firms located in the coastal provinces and inland provinces increased.
    Keywords: Emerging Markets,Economic Conditions and Volatility,Economic Theory&Research,Microfinance,Labor Policies
    Date: 2014–04–01
  2. By: Nowak, Verena; Schwarz, Christian; Suedekum, Jens
    Abstract: We consider a property rights model of a firm with two heterogeneous suppliers. The headquarters determine the firm's organizational structure, and we analyze which sourcing mode (outsourcing or vertical integration) is chosen for which of the asymmetric inputs. If suppliers' investment choices are strategic complements, the firm may keep the technologically more important input inside its boundaries and outsource the less important supplier. The firm also tends to keep more sophisticated inputs in-house, while choosing an external supplier organization for simpler and for low-cost components. These theoretical predictions are consistent with numerous case studies and recent empirical evidence on the internal organization of firms. --
    Keywords: firm organization,outsourcing,intra-firm trade,property rights approach
    JEL: D23 L23 F23
    Date: 2014
  3. By: Kang, Lili; Peng, Fei
    Abstract: More aggressive acquiring firms paid higher executive compensation than non or less aggressive acquiring firms. This paper applies the generalized propensity score (GPS) methodology to estimate the relationship between a firm’s acquisition and its executive compensation. Allowing for continuous treatment, that is, different levels of the firms’ acquisition activities, we apply the GPS method on a panel data set of Chinese Public Listed Companies (PLCs) and find that there is a causal effect of firms’ acquisition activities on executive compensation. However, there is a divergent interests between the board directors and executive managers which may bring serious agency problem in the acquisition decision. The self-selection effect plays a dominant role in the acquisition premiums of top 3 board directors, while the learning-by-acquiring effect on compensation is more prominent for executive managers than board directors. As the executive managers as a whole, can benefit more executive management positions as well as higher growth of executive compensation from aggressive acquisition than board directors and top 3 executive managers.
    Keywords: Acquisition Decision; Executive Compensation; Generalized Propensity Score; Agency problem
    JEL: C14 G34 J33 M12
    Date: 2014–04
  4. By: Stefano Bianchini; Giulio Bottazzi; Federico Tamagni
    Abstract: Theoretical and empirical studies of industry dynamics have extensively focused on the process of growth. Theory predicts that production efficiency, profitability and financial status are central channels through which some firms can survive, grow and eventually achieve outstanding growth performance. Is the same conceptual framework a convincing explanation to account for persistent corporate high growth? Exploiting panels of Italian, Spanish, and French firms we find no evidence that this is the case: companies experiencing persistent high growth are not more productive nor more profitable, and do not display peculiarly sounder financial conditions than firms that only exhibit high, but not persistent, growth performance. The finding is robust across countries, across sectors displaying different innovation patterns, and also controlling for demographic characteristics such as age and size.
    Keywords: High-growth firms, Persistent high-growth, Productivity, Firm age, Firm size
    Date: 2014–04–05
  5. By: Verena Dill; Uwe Jirjahn
    Abstract: Using linked employer-employee data from Germany, we examine the role of foreign owners in employees' perceptions of job insecurity. Our estimates show that there tends to be a positive link between foreign owners and perceived job insecurity. The link is specifically strong for foreign-owned firms with high personnel turnover or poor employment growth. It is also stronger if the foreign-owned firm provides managerial profit sharing. However, the link is negative for foreign-owned firms with product innovations.
    Keywords: Foreign ownership, perceived job insecurity, managerial profit sharing, personnel turnover, product innovation
    JEL: F23 J23 J28 J63
    Date: 2014
  6. By: Michael Fritsch; Michael Wyrwich
    Abstract: We use the historical self-employment rate as an indicator of a regional culture of entrepreneurship and link this measure to economic growth in recent periods. The results indicate that German regions with a high level of entrepreneurship in the mid-1920s have higher start-up rates about 80 years later. Furthermore, we find that the effect of current start-up activity on regional employment is significantly higher in regions with a pronounced entrepreneurial culture. We conclude that a regional culture of entrepreneurship is an important resource for regional growth.
    Keywords: Entrepreneurship, economic development, self-employment, new business formation, entrepreneurship culture, institutions
    JEL: L26 R11 O11
    Date: 2014–04
  7. By: Rong Chen; Re-Jin Guo; Ming Lin
    Abstract: Examination on firm performance subsequent to a chosen event is widely used in finance studies to analyze the motivation behind managerial decisions. However, results are often subject to bias when the self-selectivity behind managerial decisions is ignored and unspecified. This study investigates a unique corporate event of initial public offering (IPO) withdrawal, where a firm's subsequent likelihood of bankruptcy is specified in a system of switching hazard models, and the expected difference in post-IPO and post-withdrawal survival probabilities serves as a "feedback" on a firm's decision to cancel its offering. Our Bayesian inference procedure generates strong evidence that incidence of withdrawal unfavorably affects subsequent performance of a firm, and that the "feedback" is an important determinant in managerial decision. The econometric and statistical model specification and the accompanying estimation procedure we used can be widely applicable to study self-selective corporate transactions.
    Date: 2013–10–14
  8. By: Peter Kuhn; Kailing Shen
    Abstract: We study explicit gender discrimination in a population of ads on a Chinese internet job board. Gender-targeted job ads are commonplace, favor women as often as men, and are much less common in jobs requiring higher levels of skill. Employers’ relative preferences for female versus male workers, on the other hand, are more strongly related to the preferred age, height and beauty of the worker than to job skill levels. Almost two thirds of the variation in advertised gender preferences occurs within firms, and one third occurs within firm*occupation cells. Overall, these patterns are not well explained by a firm-level animus model, by a glass-ceiling model, nor by models in which broad occupational categories are consistently gendered across firms. Instead, the patterns suggest a model in which firms have idiosyncratic preferences for particular job-gender matches, which are overridden in skilled positions by factors such as thinner labor markets or a greater incentive to search broadly for the most qualified candidate.
    Date: 2013–10–14
  9. By: Dijkstra, P.T. (Groningen University)
    Abstract: We consider experimental markets of repeated homogeneous pricesetting duopolies. We investigate the effect on collusion of sequential versus simultaneous price setting. We also examine the effect on collusion of changes in the size of each subject's market share in case both subjects set the same price. Our results show that sequential price setting compared with simultaneous price setting facilitates collusion, if subjects have equal market shares or if the follower has the larger market share. With sequential price setting, we find more collusion if subjects have equal market shares rather than unequal market shares. We observe more collusion if the follower has the larger market share than if the follower has the smaller market share.
    Date: 2014
  10. By: Teodora Paligorova; Jun Yang
    Abstract: This paper examines the impact of product market competition and corporate governance on the cost of debt financing and the use of bond covenants. We find that more anti-takeover provisions are associated with a lower cost of debt only in competitive industries. Because they are exposed to higher takeover risk in competitive industries, bondholders charge higher bond spreads to firms that have fewer anti-takeover provisions. Once firms’ anti-takeover provisions are in place, we find that bondholders use fewer payment and debt priority covenants in competitive industries. Our results suggest that product market competition plays a crucial role in explaining the way a firm’s anti-takeover protection affects the cost of debt and the use of bond covenants.
    Keywords: Financial markets
    JEL: G12 G34
    Date: 2014
  11. By: Radoslav S. Raykov
    Abstract: Classical oligopoly models predict that firms differentiate vertically as a way of softening price competition, but some metrics suggest very little quality differentiation in the U.S. auto insurance market. I explain this phenomenon using the fact that risk-averse insurance companies with uncertain costs face incentives to converge to a homogeneous quality. Quality changes are capable of boosting as well as reducing profits, since quality differentiation softens price competition, but also undermines the lower-end firm’s ability to charge the markup commanded by risk aversion. This can make differentiation suboptimal, leading to a homogeneous quality; the outcome depends on consumers’ quality tastes and on how costly quality is. Additional trade-offs between quality costs, profits and profit variances compound this effect, resulting in equilibria at very low quality levels. I argue that this provides one explanation of how insurer competition drove quality down in the nineteenth-century U.S. market for fire insurance.
    Keywords: Market structure and pricing; Economic models
    JEL: G22 D43 L22 D81
    Date: 2014
  12. By: Segarra Blasco, Agustí, 1958-; Teruel, Mercedes
    Abstract: This paper analyses the effect of R&D investment on firm growth. We use an extensive sample of Spanish manufacturing and service firms. The database comprises diverse waves of Spanish Community Innovation Survey and covers the period 2004–2008. First, a probit model corrected for sample selection analyses the role of innovation on the probability of being a high-growth firm (HGF). Second, a quantile regression technique is applied to explore the determinants of firm growth. Our database shows that a small number of firms experience fast growth rates in terms of sales or employees. Our results reveal that R&D investments positively affect the probability of becoming a HGF. However, differences appear between manufacturing and service firms. Finally, when we study the impact of R&D investment on firm growth, quantile estimations show that internal R&D presents a significant positive impact for the upper quantiles, while external R&D shows a significant positive impact up to the median. Keywords : High-growth firms, Firm growth, Innovation activity. JEL Classifications : L11, L25, L26, O30
    Keywords: Empreses -- Creixement, Innovacions tecnològiques, Emprenedoria, Investigació industrial, 33 - Economia,
    Date: 2014
  13. By: Pierre-Alexandre Balland; José Antonio Belso-Martínez; Andrea Morrison
    Abstract: Although informal knowledge networks have often been regarded as a key ingredient behind the success of industrial clusters, the forces that shape their structure and dynamics remain largely unknown. Drawing on recent network dynamic models, we analyze the evolution of business and technical informal networks within a toy cluster in Spain. Empirical results suggest that the dynamics of the two networks differ to a large extent. We find that status drives the formation of business networks, proximity is more crucial for technical networks, while embeddedness plays an equally important role in the dynamics of business and technical networks.
    Keywords: Knowledge networks, industrial clusters, network dynamics, toy industry
    JEL: D85 B52 O18
    Date: 2014–04
  14. By: Giovanni Dosi; Marco Grazzi; Daniele Moschella
    Abstract: This paper examines the determinants of international competitiveness at the level of sectors and firms. First, we address the relation between cost-related and technological competition in a sample of fifteen OECD countries. Results suggest that the countries' sectoral market shares are indeed mainly shaped by technological factors (proxied by investment intensity and patents) while cost advantages/disadvantages do not seem to be play any significant role. Next, we attempt to identify the underlying dynamics at the firm level. We do that for a single country, Italy, using a large panel of Italian firms, over nearly two decades. Results show that also at micro level in most sectors investments and patents correlate positively both with the probability of being an exporter and with the capacity to acquire and to increase export market shares. The evidence on costs is more mixed. A simple measure like total labour compensation is positively correlated with the probability of being an exporter, while unit labour costs show a negative correlation only in some manufacturing sectors.
    Keywords: Trade Competitiveness, Technological Innovation, Input Costs, Firm behaviour, Technology Gap Theories of Trade
    Date: 2014–04–23

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