nep-bec New Economics Papers
on Business Economics
Issue of 2014‒06‒22
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. A Note on the Link between Firm Size and Exports By Hernandez, Pedro J.
  2. On firms' product space evolution: the role of firm and local product relatedness By Alessia LO TURCO; Daniela MAGGIONI
  3. The Distribution of Employment Growth Rates in Canada: The Role of High-Growth and Rapidly Shrinking Firms By Dixon, Jay; Rollin, Anne-Marie
  4. The Growth Potential of Startups over the Business Cycle By Petr Sedlacek; Vincent Sterk
  5. Productivity Dynamics in the Great Stagnation: Evidence from British businesses By Rebecca Riley; Chiara Rosazza Bondibene; Garry Young
  6. Free Trade Agreements and Firm-Product Markups in Chilean Manufacturing By A. R. Lamorgese; A. Linarello; Frederic Warzynski
  7. Sensitivity to Shocks and Implicit Employment Protection in Family Firms By Bjuggren, Carl Magnus
  8. Inflation Dynamics and Business Cycles By Suleyman Hilmi Kal; Nuran Arslaner; Ferhat Arslaner
  9. Exploring the dynamics of ethical judgment: The Sensemaking-Based Evolution Model By Loréa Hireche Baiada; Lionel Garreau
  10. Inventories and the Role of Goods-Market Frictions for Business Cycles By Den Haan, Wouter
  11. Finance and Productivity Growth: Firm-level Evidence By Levine, Oliver; Warusawitharana, Missaka

  1. By: Hernandez, Pedro J.
    Abstract: This paper re-examines the link between firm size and exports in order to study the proposal that consists of increasing the firm size to raise exports as a way out of the current economic crisis. The elasticity of export propensity (percentage of exported sales) with respect to firm size depends on several firm characteristics. The new theories of international trade emphasize the firm heterogeneity as the theoretical basis of this behaviour. In the context of such heterogeneity, this paper uses the quantile regression methodology to analyze the effect of firm size on export propensity of the firms, confirming the existence of a positive relationship that becomes less important as export propensity increases. The traditional estimate of this elasticity on the average of the export propensities distribution underestimates the effect in the bottom of the distribution and overestimates the effect on most of it.
    Keywords: Exports, Firm Size
    JEL: F14 L25
    Date: 2013–11–19
  2. By: Alessia LO TURCO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Daniela MAGGIONI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Abstract: We explore the role of firm and local product-specific capabilities in fostering the introduction of new products in the Turkish manufacturing. Firms' product space evolution is characterised by strong cognitive path dependence which, however, is relaxed by firmheterogeneity in terms of size, efficiency and international exposure. The introduction of new products in laggard Eastern regions, which is importantly related to the evolution of their industrial output, is mainly affected by firm internal product specific resources. On the contrary, product innovations inWestern advanced regions hinge relatively more on the availability of suitable local competencies.
    Keywords: Firm heterogeneity, Product Innovation
    JEL: D22 O12 O53
    Date: 2014–06
  3. By: Dixon, Jay; Rollin, Anne-Marie
    Abstract: This paper uses data from Statistics Canada's Longitudinal Employment Analysis Program database to study the distribution of annual employment growth rates in Canada over the 2000-to-2009 period, with a special emphasis on firms in the tails of the distribution, referred to here as High-Growth Firms (HGFs) and Rapidly Shrinking Firms (RSFs). The study has three objectives. First, it describes the distributions of employment growth rates in Canada to see whether they are consistent with observations in other countries. Second, it quantifies the contribution of HGFs and RSFs to aggregate job creation and destruction. The third objective is to examine, using quantile regression techniques, the role of firm size and firm age in the performance of HGFs and RSFs.
    Keywords: Business adaptation and adjustment, Business performance and ownership, Employment and unemployment, Entry, exit, mergers and growth, Labour, Small and medium-sized businesses
    Date: 2014–05–15
  4. By: Petr Sedlacek (Rheinische Friedrich-Wilhelms-Universität Bonn (University of Bonn), Wirtschaftswissenschaftlicher Fachbereich (Economics Department), Bonn Graduate School of Economics); Vincent Sterk (Centre for Macroeconomics (CFM))
    Abstract: This paper shows that job creation of cohorts of U.S. firms is strongly infl uenced by aggregate conditions at the time of their entry. Using data from the Business Dynamics Statistics (BDS) we follow cohorts of young firms and document that their employment levels are very persistent and largely driven by the intensive margin (average firm size) rather than the extensive margin (number of firms). To differentiate changes in the composition of startup cohorts from post-entry choices and to evaluate aggregate effects, we estimate a general equilibrium firm dynamics model using BDS data. We find that even for older firms, the aggregate state at birth drives the vast majority of variations in employment across cohorts of the same age. The key force behind this result are fl uctuations in the composition of startup cohorts with respect to firms' potential to grow large. At the aggregate level, factors determined at the startup phase account for the large low-frequency fl uctuations observed in the employment rate.
    Keywords: Firm Dynamics, Heterogeneous Agents, Maximum Likelihood, DSGE
    JEL: E32 D22 L11 M13
    Date: 2014–02
  5. By: Rebecca Riley (National Institute of Economic and Social Research (NIESR); Centre for Macroeconomics (CFM)); Chiara Rosazza Bondibene (National Institute of Economic and Social Research (NIESR); Centre for Macroeconomics (CFM)); Garry Young (Bank of England; Centre for Macroeconomics (CFM))
    Abstract: We investigate labor productivity dynamics amongst British businesses in the wake of the credit crisis of 2007/8. The external restructuring of firms (i.e. changes in market share, firm entry and exit) contributed to a fall in productivity growth relative to trend amongst small businesses in bank dependent industries, consistent with the idea that an adverse credit supply shock caused inefficiencies in resource allocation across firms. But, the major part of the decline in UK productivity growth following the credit crisis was accounted for by a widespread productivity shock within firms, pointing to the importance of other factors in explaining the Great Stagnation.
    Keywords: productivity growth, reallocation, Great Recession and Stagnation, credit shock
    JEL: L11 O47 E32
    Date: 2013–08
  6. By: A. R. Lamorgese (Bank of Italy); A. Linarello (Bank of Italy and UPF); Frederic Warzynski (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: In this paper, we use detailed information about firms’ product portfolio to study how trade liberalization affects prices, markups and productivity. We document these effects using firm product level data in Chilean manufacturing following two major trade agreements with the EU and the US. The dataset provides information about the value and quantity of each good produced by the firm, as well as the amount of exports. One additional and unique characteristic of our dataset is that it provides a firm-product level measure of the unit average cost. We use this information to compute a firm-product level measure of the profit margin that a firm can generate. We find that new products start being sold on foreign markets as export tariff fall. Moreover, for those products, we observe a fall in both prices and unit average costs. Those effects are mainly driven by an increase in productivity at the firm-product level. On average, adjustment on the profit margin does not appear to play a role. However, for more differentiated products, we find some evidence of an increase in markups, suggesting that firms do not fully pass-through increases in productivity on prices whenever they have enough bargaining power.
    Keywords: markups, physical productivity, free trade agreements
    JEL: F13 F14 L11
    Date: 2014–06–10
  7. By: Bjuggren, Carl Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: In this study I present empirical evidence that employment in family firms is less sensitive to performance and product market fluctuations, both at the industry and at the firm level. This supports the idea that family firms are able to offer their employees implicit employment protection. Family firms are believed to have longer time horizons, and are as owners more easily identified with their company and its actions. These are features that could make family firms more cautious in terms of adjusting their employment. I confirm previous findings that family firms are less sensitive to sales fluctuations at the industry level and I show that this also holds for fluctuations in value added. I extend the analysis to show that family firms are less sensitive to unanticipated industry shocks by filtering out the trend component. When investigating idiosyncratic shocks to the firm, I find that family firms are less anxious to translate temporary shocks in performance into changes in employment. By using full population data from tax registers, I am able to identify all family firms, both listed and non-listed. This has previously not been feasible.
    Keywords: Family Firms; Risk Sharing; Employment Protection; Shocks
    JEL: D22 G32 J21 J23 L25
    Date: 2014–06–10
  8. By: Suleyman Hilmi Kal; Nuran Arslaner; Ferhat Arslaner
    Abstract: This paper aims to investigate whether the effect of inflation expectations, exchange rate, money supply, industrial production and import prices on inflation depends on business cycle. For this purpose, a two states Markov Switching Auto Regression model with time varying transition probabilities to a generic inflation model is implemented for the period 2003-2013. In the model the states are assigned whether output gap is positive or negative. The inflation forecasting in-sample and out-of-sample is also utilized by adopting mean squared error and Diebold Mariano test to measure explanatory and forecasting power of our model. Our main finding provides that the determinants of inflation have different dynamics during boom periods as compared to recessions.
    Keywords: Inflation; Output Gap; Markov Switching Autoregressions; Business Cycles
    JEL: C32 E30 E31 E37 E58
    Date: 2014–03
  9. By: Loréa Hireche Baiada (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine, MMS - Département Management et Marketing et Stratégie - Institut Mines-Télécom - Télécom Ecole de Management); Lionel Garreau (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: A growing body of research has been drawing on the sensemaking perspective in order to modelize ethical judgment. Nevertheless, these sensemaking models do not account for how sensemaking can further our conceptualisation of the evolution of ethical judgment over time. In this study, we build on an interview-based design to develop a process model that accounts for the dynamics of ethical judgment. We then identify the mechanisms and influences of this process. Finally, we discuss the practical implications of our findings for ethical decision- making and for the teaching of business ethics.
    Keywords: ethical judgment, ethical decision making, sensemaking, process
    Date: 2014–05–26
  10. By: Den Haan, Wouter
    Abstract: Changes in the stock of inventories are important for fluctuations in aggregate output. However, the possibility that firms do not sell all produced goods and inventory accumulation are typically ignored in business cycle models. This paper captures this with a goods-market friction. Using US data, "goods-market efficiency" is shown to be strongly procyclical. By including both a goods-market friction and a standard labor-market search friction, the model developed can substantially magnify and propagate shocks. Despite its simplicity, the model can also replicate key inventory facts. However, when these inventory facts are used to discipline parameter values, then goods-market frictions are quantitatively not very important.
    Keywords: matching models, search frictions, magnification, propagation
    JEL: E12 E24 E32
    Date: 2014–01
  11. By: Levine, Oliver (University of Wisconsin); Warusawitharana, Missaka (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Using data on a broad set of European firms, we find a strong positive relationship between the use of external financing and future productivity (TFP) growth within firms. This relationship is robust to various measures of financing and productivity, and strengthens as financing costs increase. We provide evidence against a reverse-causality explanation by showing that this relationship arises from the component of TFP that is outside the information set of the firm. These findings indicate that financial development supports productivity growth within firms, and helps explain why economic activity remains persistently depressed following financial crisis.
    Keywords: Finance-growth nexus; financial crisis; total factor productivity (TFP)
    Date: 2014–02–24

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