nep-bec New Economics Papers
on Business Economics
Issue of 2014‒06‒28
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Financial decisions, market competition and firm performance: Empirical evidence for Ibero-American countries By Manuel Sánchez Valadez
  2. Stock-based Compensation Plans and Employee Incentives By Jan Zabojnik
  3. Competition between firms in developing and developed countries By Kimura, Koichiro
  4. Spatial agglomeration and firm exit: a spatial dynamic analysis for Italian provinces By Giulio Cainelli; Sandro Montresor; Giuseppi Vittucci Marzetti
  5. Corporate Influence and Political Corruption: Lessons from Stock Market Reactions to Political Events By Jeffrey Milyo
  6. Exporters During the Trade Collapse: The (Surprising) Resiliency of the Small Exporter By Rahul Giri; Enrique Seira; Kensuke Teshima    
  7. Does anti-competitive service sector regulation harm exporters? Evidence from manufacturing firms in Spain By Monica Correa Lopez; Rafael Domenech
  8. Industry structure and pricing over the business cycle By Spiegel, Yossi; Stahl, Konrad
  9. SMEs and Barriers to Eco-Innovation in EU: A Diverse Palette of Greens. By Giovanni Marin; Alberto Marzucchi; Roberto Zoboli
  10. The Structure and Evolution of Buyer-Supplier Networks By Takayuki Mizuno; Wataru Souma; Tsutomu Watanabe
  11. Defacto and Deeded Intellectual Property: Knowledge-Driven Co-Evolution of Firm Collaboration Boundaries and IPR Strategy By Lynne G. Zucker; Michael R. Darby
  12. Accounting for Spanish business cycles. By Jesús Rodríguez-López; Mario Solís-García
  13. Competitive Environment, Indebtedness and Asset Specificity: Evidence from Spanish Firms By Manuel Sánchez Valadez
  14. Disentangling economic recessions and depressions By Bertrand Candelon; Norbert Metiu; Stefan Straetmans

  1. By: Manuel Sánchez Valadez
    Abstract: Economic literature had shown the existence of the interrelationship between the financial decisions of the firms and their competitive decisions; either by convenience or by data availability, most of empiric papers addressed separately the influence of both kinds of decisions over firm performance. With it, this paper through a cross-section model, which uses information of around 3,900 enterprises in 14 Iberoamerican countries, explores jointly the possible effects of both kinds of decisions of the firms (financial and competitive) over their performance. The results suggest the existence of differences in the relationships between variables accordingly the market competition intensity. Also the results suggest that the financial decisions of the firms could be used as an additional tool of the competitive strategy of the firms.
    Keywords: Indebtedness, trade credit, competition, firm performance
    JEL: G32 L20
    Date: 2013–06
  2. By: Jan Zabojnik (Queen's University)
    Abstract: Standard principal-agent theory predicts that large firms should not use employee stock options and other stock-based compensation to provide incentives to non-executive employees. Yet, business practitioners appear to believe that stock-based compensation improves incentives, and mounting empirical evidence points to the same conclusion. This paper provides an explanation for why stock-based incentives can be effective. In the model of this paper, employee stock options complement individual measures of performance in inducing employees to invest in firm-specific knowledge. In some situations, a contract that only consists of options is more efficient than a contract based solely on individual performance.
    Keywords: Stock-based Compensation, Employee Stock Options, Optimal Incentive Contracts, Firm-specific Knowledge
    JEL: D86 J33 M52
    Date: 2014–06
  3. By: Kimura, Koichiro
    Abstract: We analyze competition in emerging markets between firms in developing and developed countries from the viewpoint of the boundaries of the firm. Although indigenous firms generally face a disadvantage in technology compared with foreign firms, they have an advantage in marketing as local firms. Moreover, they have opportunities to leave weaker fields to independent specialized firms and use lower wages. On the other hand, foreign firms also have their own advantages and disadvantages for growth. Therefore, entry conditions for indigenous firms can vary greatly depending on the situation. We classify these conditions into eight cases by developing a model and showing each boundary choice for indigenous firms.
    Keywords: Developing countries, Developed countries, Business enterprises, Foreign affiliated firm, Indigenous firms, The boundaries of the firm, Foreign firms
    JEL: F23 L22 O12
    Date: 2014–06
  4. By: Giulio Cainelli (University of Padova); Sandro Montresor (University of Bologna); Giuseppi Vittucci Marzetti (University of Milano - Bicocca)
    Abstract: The paper investigates the effect of spatial agglomeration on firm exit in a dynamic framework. Using a large dataset at the industry-province level for Italy (1998-2007), we estimate a spatial dynamic panel model via a GMM estimator and analyze the short-run impact of specialization and variety on firm exit. Specialization negatively affects firm exit rates in the short-run. The effect is particularly significant for low-tech firms. The impact of variety on firm mortality rates at the industry level is instead less clear, although still negative and significant for low-tech firms.
    Keywords: Firm exit, Localization, Spatial agglomeration, Specialization, Variety. Classification-JEL: R11, R12, L11, G20.
    Date: 2013–10
  5. By: Jeffrey Milyo (Department of Economics, University of Missouri-Columbia)
    Abstract: Stock market reactions to political events demonstrate that the value of some firms is strongly affected by which party controls political power. However, contrary to common perception, event studies do not indicate that the ability to make unlimited political contributions or expenditures enhances a firm's value. Instead, geographic and personal connections to political actors matter more for firms' bottom line, although there is some evidence that personal connections may be rented via professional lobbying.
    Keywords: Campaign Contributions, Corruption, Event Studies, Lobbying
    JEL: D7 H0 K0 L2
    Date: 2013–12–30
  6. By: Rahul Giri; Enrique Seira; Kensuke Teshima    
    Abstract: How did small exporters fare relative to large exporters during the 2008-09 crisis? Examining the performance of Mexican exporters reveals that the crisis did not make smaller exporters more likely to exit, grow less, or expand less their product line relative to larger exporters. Workhorse models of trade would predict the opposite. The same models, however, are consistent with the data before the crisis: within industry, (i) firm exit rate is decreasing in size; (ii) conditional on survival, export growth is decreasing in size; (iii) product line expansion is increasing in size.
    Keywords: Peer effects, education, social networks, inequality
    JEL: I21 I24 O1
    Date: 2014–03
  7. By: Monica Correa Lopez; Rafael Domenech
    Abstract: In a panel study of firm-level data from Spanish manufacturers, we show that reducing anti-competitive regulation in the provision of upstream services has a positive and sizeable effect on the volume of exports of downstream firms. Our estimates indicate that deregulation is very beneficial for the export performance of large corporations, especially if they are foreign-owned multinationals, while the evidence for SMEs is much weaker. Hence, firm characteristics matter for the connection between regulation and exports. Simulation exercises suggest that large firms increased their volume of exports by an average of 49% as a result of deregulation, such that the industries that benefited the most were typically more dependent on service inputs. The improvements in the regulatory framework of transportation services and energy provision that took place over the 1990s and 2000s in Spain had particularly strong effects on the volume of foreign sales.
    Keywords: Exports, Service regulation, Margins of trade, Firm size
    JEL: F14 L43 F23 D24
    Date: 2014–06
  8. By: Spiegel, Yossi; Stahl, Konrad
    Abstract: We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the entrant is a first mover, and capacity utilization can be either pro- or countercyclical if the incumbent is a first mover. Moreover, our results show that entry deterrence by the incumbent firm can either amplify or dampen the effect of demand fluctuations on prices, price-cost margins, and capacity utilization. --
    Keywords: price competition,business cycle,entry,entry deterrence
    JEL: D43 L41
    Date: 2014
  9. By: Giovanni Marin (CERIS-CNR, National Research Council of Italy, Milan.); Alberto Marzucchi (CERIS-CNR, National Research Council of Italy, Milan.); Roberto Zoboli (CERIS-CNR, National Research Council of Italy, Milan.)
    Abstract: Eco-innovation is an explicit aim of major EU policy strategies. Many environmental policies 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: 2014–04
  10. By: Takayuki Mizuno (National Institute of Informatics, Graduate School of Economics, University of Tokyo, The Canon Institute for Global Studies); Wataru Souma (College of Science and Technology, Nihon University); Tsutomu Watanabe (Graduate School of Economics, University of Tokyo, The Canon Institute for Global Studies)
    Abstract: In this paper, we investigate the structure and evolution of customer-supplier networks in Japan using a unique dataset that contains information on customer and supplier linkages for more than 500,000 incorporated non-financial firms for the five years from 2008 to 2012. We find, first, that the number of customer links is unequal across firms; the customer link distribution has a power-law tail with an exponent of unity (i.e., it follows Zipf’s law). We interpret this as implying that competition among firms to acquire new customers yields winners with a large number of customers, as well as losers with fewer customers. We also show that the shortest path length for any pair of firms is, on average, 4.3 links. Second, we find that link switching is relatively rare. Our estimates indicate that the survival rate per year for customer links is 92 percent and for supplier links 93 percent. Third and finally, we find that firm growth rates tend to be more highly correlated the closer two firms are to each other in a customer-supplier network (i.e., the smaller is the shortest path length for the two firms). This suggests that a non-negligible portion of fluctuations in firm growth stems from the propagation of microeconomic shocks – shocks affecting only a particular firm – through customer-supplier chains.
    Keywords: buyer-supplier networks; supply chains; input-output analysis; power-law distributions; firm dynamics
    JEL: L11 L14 C67
    Date: 2014–01
  11. By: Lynne G. Zucker; Michael R. Darby
    Abstract: Research on intellectual property has focused on formal legally recorded rights that we call deeded, most often measured by granted patents. Meanwhile, other “defacto” IP (mainly purposive secrecy and natural excludability) has become more important because of the increasing closeness of commercial technologies to cutting edge science. A “corporate-academic” model has developed and become institutionalized over the last three decades which emphasizes attracting the best and brightest scientists, providing them with a commensurate increase in autonomy including initiation of bench-level collaborations with top university scientists in which valuable tacit knowledge is transferred in both directions. We provide suggestive evidence that both firm and university scientists learn from these collaborations, e.g., both types of scientists experience sharply higher patenting rates once they have engage in university-firm collaborations. We propose and test two indicators of adoption of the corporate-academic model, whether or not the firm has ever: (a) co-authored an article with a university scientist and (b) applied for (an eventually granted) patent with non-patent references, where these references are used importantly to cite scientific articles and other scientific materials. Both were robustly positive and statistically significant across four measures of U.S. high-tech firm success (publishing, patenting, obtaining venture capital, and going public) for six broad S&T areas (bio/chem/med, information technology, nanotechnology, semiconductors, other science, and other engineering). Star scientists publication as or with firm employees, SBIR grants received, and citation-weighted patents and articles all played comparatively supporting roles in the empirical estimates. We concluded that the most successful high-tech firms have adopted a strategy of operating near the edge of the scientific envelope where high levels of tacit knowledge provide substantial natural excludability reducing or preventing entry of imitators.
    JEL: J44 L25 L63 L64 L65 M13 O31 O32 O33 O34
    Date: 2014–06
  12. By: Jesús Rodríguez-López (Department of Economics, Universidad Pablo de Olavide de Sevilla); Mario Solís-García (Department of Economics, Macalester College, Saint Paul (USA))
    Abstract: We apply the business cycle methodology proposed by Chari, Kehoe, and McGrattan (2007) to identify the sources of Spanish business fluctuations during two outstanding cyclical episodes: the recession alongside the transition to democracy in 1977 and the great recession of 2008. We find that the labor wedge plays a key role during both recessions and that taxes and labor market institutions are likely behind the wedge movements. We conclude that any model that tries to understand the causes of recessions that occurred in the last three decades should focus on the labor wedge.
    Keywords: Business cycle accounting, efficiency wedge, labor wedge, investment wedge
    JEL: E32 O11 O41 O47 O53
    Date: 2014–06
  13. By: Manuel Sánchez Valadez
    Abstract: In the firm's competitive strategy act together their financial decision and their decisions in the product markets. Even if in the last three decades the theoretical and empirical literature has growth, still are topics few explored. One of them is the relationship between firm's asset specificity, as a characteristic of the competitive environment, and their indebtedness as competitive tool. This paper tries answer if additionally to the level of specificity in the firm's assets the corporations use their indebtedness as another tool in their competitive strategy. The results show that the asset specificity influences in different way the firms' debt, the effect differs accordingly at the debt' maturity and the competitive environment faced.
    Keywords: Asset specificity, Indebtedness, Competitive strategy
    JEL: G32 L10
    Date: 2013–10
  14. By: Bertrand Candelon; Norbert Metiu; Stefan Straetmans
    Abstract: We propose a novel nonparametric method to distinguish between recessions vs. depressions and expansions vs. booms in aggregate economic activity. Four depression and
    Keywords: Business cycles, Depression, Multinomial logistic regression, Outlier
    JEL: C14 C35 E32
    Date: 2014–06–16

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