nep-bec New Economics Papers
on Business Economics
Issue of 2014‒05‒24
sixteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Efficiency or Bounded Rationality? Drivers of Firm Diversification Strategies in Vietnam By Hien Thu Tran; Enrico Santarelli; Enrico Zaninotto
  2. Matching Capital and Labor By Jonathan B. Berk; Jules H. van Binsbergen; Binying Liu
  3. Innovative business models for high-tech entrepreneurial ventures: the organizational design challenges By Colombo, Massimo G.; Mohammadi, Ali; Lamastra, Cristina Rossi
  4. Where Gibrat meets Zipf: Scale and Scope of French Firms By MArco Bee; Massimo Riccaboni; Stefano Schiavo
  5. Extensive Margins of Imports and Profitability: First Evidence for Manufacturing Enterprises in Germany By Wagner, Joachim
  6. Do Dominant Firms Provide More Training? By Christos Bilanakos; Colin P. Green; John S. Heywood; Nikolaos Theodoropoulos
  7. Does Board Gender Diversity Make a Difference? New Evidence from Quantile Regression Analysis By Rey Dang; Duc Khuong Nguyen
  8. Regionalization vs. Globalization By Hideaki Hirata; M. Ayhan Kose; Chris Otrok
  9. The Impact of Political Majorities on Firm Value: Do Electoral Promises or Friendship Connections Matter? By Renaud Coulomb; Marc Sangnier
  10. Rethinking Deindustrialization By Andrew B. Bernard; Valerie Smeets; Frederic Warzynski
  11. Outsourcing and the shift from manufacturing to services By Giuseppe Berlingieri
  12. Regional Financial Development and Firm Growth in Peru By Cristhian Seminario; Edgar Salgado; Eduardo Morón
  13. Smoothing the adjustment to trade liberalization By Wolfgang Lechthaler; Mariya Mileva
  14. Strategic delegation in two-sided markets By Vitor Miguel Ribeiro
  15. Farmland Markets and Farm Business Finances By Ifft, Jennifer
  16. Public Enforcement of Securities Market Rules: Resource-based evidence from the Securities Exchange Commission By Lohse, Tim; Pascalau, Razvan; Thomann, Christian

  1. By: Hien Thu Tran; Enrico Santarelli; Enrico Zaninotto
    Abstract: Considering the case of diversified firms within a transition country such as Vietnam, this paper investigates diversification relatedness taking into account both firm-specific and industry-level components. Two measures of relatedness, the survivor-based and the SIC distances approach, are used to investigate the choice of destination industry by diversifying firms. The conflicting result between these two relatedness index suggests that there has been a trend of imitation and follow-up among inexperienced firms that resemble the direction and intensity of diversification of dominating players within the industry (herd behavior). Accordingly, a higher survivor-based index does not lead to a superior entrepreneurial performance. However, diversified firms gain experience overtime and choose more efficient business combinations in subsequent entries. Consistently with our previous findings, the classical SIC-based approach affirms again that greater diversification raises profitability, but just to an optimum relatedness point beyond which the positive effect starts to fade away. To control for the endogeneity of diversification relatedness and serial correlation of error terms we adoptinstrumental-variable two-stage least-squares estimation (IV-2SLS) with GMM treatment.
    Keywords: Firm diversification, firm performance, bounded rationality, transition economy
    JEL: L25 L29 P23
    Date: 2014
  2. By: Jonathan B. Berk; Jules H. van Binsbergen; Binying Liu
    Abstract: We establish an important role for the firm by studying capital reallocation decisions of mutual fund firms. We show that firms add significant value by matching capital to labor. We find that, following the firm's decision to reallocate capital to one of its managers, future value added increases significantly. We find no evidence of a similar effect when a firm hires a manager from another firm. We conclude that an important reason why firms exist is the private information that derives from firms' ability to better assess the skill of their own employees.
    JEL: D22 G11 G12 G2 G20 G3 G30 J01 J24 L22 L23 L25
    Date: 2014–05
  3. By: Colombo, Massimo G. (Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Italy); Mohammadi, Ali (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lamastra, Cristina Rossi (Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Italy)
    Abstract: Entrepreneurial ventures operating in high-tech industries are more and more adopting innovative business models, which are based on use of the market for ideas instead of the market for products or on the leveraging of communities of users and developers. A common characteristic of these innovative business models is their dependence on innovative technological knowledge and, consequently, on the ways in which intellectual property rights over this knowledge are designed (i.e., tight vs. loose appropriability regime). This chapter grounds on mainstream organizational design theories to speculate on how high-tech entrepreneurial ventures should organize internally to successfully implement these innovative business models. Specifically, it analyzes how firms’ structure, decision rights, and human resource management practices should be adapted to the need of generating, absorbing, and protecting innovative technological knowledge. Heeding a recent call in management literature, we will conduct our analysis considering organizational design variables both at the individual and firm level.
    Keywords: business model innovation; brganizational design; high-tech entrepreneurial ventures
    JEL: L17 L22 L26 O31
    Date: 2014–05–21
  4. By: MArco Bee; Massimo Riccaboni; Stefano Schiavo
    Abstract: The proper characterization of the size distribution of business firms represents an important issue in economic literature, with the most common reference distribu- tions being the lognormal and the Pareto varieties. This analysis is related to some methodological issues that are rarely properly addressed in applied work, and may significantly affect the results: the major difficulties arise from low power of the tests caused by limited sample size and the common practice of binning the data. In this paper we contribute to this body of literature by analyzing the size distribu- tion of all French companies, strongly rejecting the hypothesis that it is a Pareto distribution. Moreover, we argue that the lognormal distribution is a more reason- able first-cut benchmark for the entire population of firms. This is especially true for single-product firms, while we show the emergence of a Zipf tail for the class of multi-product companies. Our findings are in strong agreement with some recent theoretical contributions, which predict that the size distribution depends on a set of industry specific determinants.
    Keywords: Firm size distribution, multi-product firms, Pareto, ZipfÕs law, lognormal
    JEL: C46 L11 L25
    Date: 2014
  5. By: Wagner, Joachim (Leuphana University Lueneburg and CESIS, Stockholm)
    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 the extensive margins of imports (the number of imported goods and the number of countries imported from) and firm profitability. While both extensive margins are highly positively linked with firm productivity, profits are not higher in firms that import more goods and from more countries. This demonstrates that productivity advantages of importers are eaten up by extra costs related to buying more goods in more countries.
    Keywords: Imports; intensive margins; profitability; Germany
    JEL: F14
    Date: 2014–05–20
  6. By: Christos Bilanakos; Colin P. Green; John S. Heywood; Nikolaos Theodoropoulos
    Abstract: This paper examines the relationship between firm-specific training and product market competition. A canonical Cournot competition model shows that the profitability of training investments increases as the number of competitors decreases. Empirical evidence from British establishments in 1998, 2004 and 2011 confirms that a critical form of specific training, cross-training, is far more extensive in less competitive product markets. This persists within all three separate cross-sections and in two separate panel estimates and suggests that a dominant product market position increases the incentives to invest in specific human capital.
    Keywords: Specific training, Cross-training, Product market competition, Panel data
    Date: 2014–05
  7. By: Rey Dang; Duc Khuong Nguyen
    Abstract: The under-representation of female directors in the boardroom where corporate strategic decisions are made has recently become not only an ethical business case but also a public pressure to improve this gender imbalance. While there is some practical evidence to suggest that gender-diverse corporate boards have a positive impact on performance, the results from elaborate academic research are not always conclusive and vary across samples and countries. This article examines the relationship between board gender diversity and firm performance from a dynamic perspective through using quantile regression. This method allows us to capture the potential impact of female representation at different points of the distributions of the performance measure. Using a panel of French listed companies (SBF 120) over the period 2009-2011, we uncover that the impact of board gender di- versity on firm performance is not alike over different points of the conditional distribution, and that this impact depends on the measure of performance under consideration. Typically, board gender diversity affects negatively the Tobin’s Q and positively the return on asset when these variables are high and low, respectively. Finally, we show that using traditional OLS and fixed- random-effect estimations may mask the true effect of board gender diversity.
    Keywords: Board of Directors; Gender; Diversity; Corporate Governance
    JEL: G30 G34 J16
    Date: 2014–05–19
  8. By: Hideaki Hirata; M. Ayhan Kose; Chris Otrok
    Abstract: Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles. Our model allows us to assess the roles played by the global, regional, and country-specific factors in explaining business cycles in a large sample of countries and regions over the period 1960–2010. We find that, since the mid-1980s, the importance of regional factors has increased markedly in explaining business cycles especially in regions that experienced a sharp growth in intra-regional trade and financial flows. By contrast, the relative importance of the global factor has declined over the same period. In short, the recent era of globalization has witnessed the emergence of regional business cycles.
  9. By: Renaud Coulomb (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), Grantham Research Institute - London School of Economics (LSE)); Marc Sangnier (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))
    Abstract: This paper simultaneously estimates the impact of political majorities on the values of firms that would benefit from the platforms of the two main candidates at the 2007 French presidential election, Ségolène Royal and Nicolas Sarkozy, and of those that are ruled or owned by Sarkozy's friends. We use prediction-market data to track each candidate's victory probability, and investigate how this relates to firms' abnormal returns. Our estimates suggest that the value of firms that would likely benefit from the platforms of Royal and Sarkozy changed by 1% and 2%, respectively, with the candidates' victory probabilities, and that firms connected to Sarkozy out-performed others by 3% due to his election.
    Keywords: political majority; prediction markets; firm value; abnormal returns; political connections
    Date: 2014–05
  10. By: Andrew B. Bernard (Tuck School of Business at Dartmouth, CEPR & NBER); Valerie Smeets (Department of Economics and Business, Aarhus University, Denmark); Frederic Warzynski (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: This paper examines the decline in manufacturing in Denmark from 1994 to 2007. As in almost every other high-income country, manufacturing employment and the number of manufacturing firms in Denmark have been shrinking as a share of the total and in absolute levels. Most of the decline of manufacturing is due to firm exit and reduced employment at surviving manufacturers. However, a portion of the recorded decline is due to firms switching industries, from manufacturing to service sectors. We focus on this last group of firms, asking what they looked like before switched and how they fared after the switch. Overall this is a group of small high productivity firms that grow more rapidly after they switch. By 2007, employment at these former manufacturers equals 10 percent of manufacturing employment, reducing the apparent decline in manufacturing employment by about one half.
    Keywords: deindustrialization, manufacturing firms, industry switching, employment, skill composition
    JEL: D22 L25
    Date: 2014–05–19
  11. By: Giuseppe Berlingieri
    Abstract: Giuseppe Berlingieri looks at the structural transformation of the US economy over the past 60 years.
    Keywords: Structural transformation, outsourcing, professional and business services, inputoutputtables, intermediates
    JEL: D57 L16 L24 L84 O14 O41 O51
    Date: 2014–02
  12. By: Cristhian Seminario; Edgar Salgado; Eduardo Morón
    Abstract: This paper documents the relationship between regional financial development and firm growth in the Peruvian manufacturing sector. In order to control for mutual causality between credit availability and firm growth, industry differences in financial dependence on external funds are exploited. The 1994 and 2008 rounds of the National Economic Census are used, permitting analysis at the firm level as well as the activity level. Results suggest a significant and positive effect of financial deepening on surviving firms` growth. However, this effect is smaller for micro enterprises, suggesting that the cost of external funding decreases with financial development mainly for large firms. The conclusions remain unchanged when entering and exiting firms are included. The paper further finds that credit expansion have encouraged not only firm growth but also firm entry. The results are robust using an alternative measure of financial dependence.
    Keywords: Production & Business Cycles, Business Development, Financial Services, Firm growth, Manufacturing, Financial development
    Date: 2013–06
  13. By: Wolfgang Lechthaler; Mariya Mileva
    Abstract: We use a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to analyze economic policy to compensate the losers of trade liberalization and to reduce the ensuing wage inequality. We consider several instruments of economic policy: a wage tax to redistribute income between skilled and unskilled workers; sector-specific consumption taxes and profit taxes to affect inter-sectoral wage inequality; sector-specific firm entry subsidies, worker sector-migration subsidies and training subsidies to speed up the adjustment process. We find that the re-distributional and efficiency effects of these instruments differ very much. Probably the most potent tool to reduce the wage inequality after trade liberalization are training subsidies. Although the policy also generates inefficiencies because too many workers are trained, the costs of these inefficiencies are relatively low.
    Keywords: Trade liberalization, wage inequality, adjustment dynamics, re-distribution
    JEL: E24 F11 F16 J62
    Date: 2014–05
  14. By: Vitor Miguel Ribeiro (Vitor Miguel Ribeiro - FEP and CEF.UP - Vitor)
    Abstract: In a two-sided market duopoly, we investigate the effects of delegating long run restrictive and unrestrictive decisions to managers by the platforms' owners, the effects of the platforms' ownership establishing long run decisions without managers and the impacts of asymmetric regimes between platforms in terms of profitability, consumer surplus and total welfare. The fact that our analysis is focused on platforms introduces inter-group externalities. We find that for sufficiently low intensity of the inter-group externality, the owners of symmetric platforms should take the long run decisions by themselves. However, for an intermediate level of the inter-group externality, the owners of symmetric platforms should delegate the long run decision to their managers. Finally, for sufficiently high level of the inter-group externality, only tipping equilibria occur. Under an asymmetric environment, that is, one platform owner establishes long run decisions and the other owner delegate's long run decisions to their manager the long run decisions should be taken by the platform's owners.
    Keywords: Two-sided markets, tipping, spatial competition, strategic delegation, managerial incentives.
    JEL: D43 L11 L13 R12
    Date: 2014–05
  15. By: Ifft, Jennifer
    Keywords: Crop Production/Industries, Farm Management,
    Date: 2014
  16. By: Lohse, Tim (Berlin School of Economics and Law, & Max Planck Institute for Tax Law and Public Finance,); Pascalau, Razvan (Department of Economics and Finance,); Thomann, Christian (Royal Institute of Technology (KTH), Centre of Excellence for Science and Innovation Studies (CESIS), Ministry of Finance, & Leibniz University of Hannover)
    Abstract: We empirically investigate whether increases in the U.S. Securities and Exchange Commission’s (SEC) budget have an effect on firms’ compliance behavior with securities market rules. Our study uses a dataset on the SEC’s resources and its enforcement actions over a period beginning shortly after the Second World War and ending in 2010. We find that increases in the SEC’s resources both improve compliance and lead to an increased activity level of the SEC. The higher level of compliance is reflected by a decrease in the numbers of enforcement cases. The increased activity level is reflected by a surge in the number of inves-tigations conducted by the SEC.
    Keywords: Public enforcement; securities laws; compliance; Securities and Exchange Com-mission; budget
    JEL: D21 G14 G18 K22
    Date: 2014–05–20

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