nep-bec New Economics Papers
on Business Economics
Issue of 2014‒07‒05
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Export Mix Changes and Firm Performance: Evidence from Chile By Roberto Álvarez; Andrés Zahler
  2. Geography and Firm Performance in the Japanese Production Network By Andrew B. BERNARD; Andreas MOXNES; SAITO Yukiko
  3. Firm Growth Dynamics: The importance of large jumps By ARATA Yoshiyuki
  4. Financial Development and Employment: Evidence from Transition Countries By Dorothea Schäfer; Susan Steiner
  5. ENFORCING COVENANTS NOT TO COMPETE: THE LIFE-CYCLE IMPACT ON NEW FIRMS By Evan Starr; Natarajan Balasubramanian; Mariko Sakakibara
  6. Who Should We Ask? Employer and Employee Perceptions of Skill Gaps within Firms By McGuinness, Seamus; Ortiz, Luis
  7. Contribution to reduce risks related to strategic decisions in new uncertain competitive environments: The case of Algerian State-Owned Firms By Abdelkader Baaziz; Luc Quoniam
  8. Energy management systems and market value: Is there a link? By Thi-Hong-Hanh Pham
  9. Publicization versus Privatization: Recent worldwide evidence By Stefano CLÒ; Chiara F. DEL BÒ; Matteo FERRARIS; Carlo FIORIO; Massimo FLORIO; Daniela VANDONE
  10. Testing Sukuk And Conventional Bond Offers Based On Corporate Financing Theories Using Partial Adjustment Models: Evidence From Malaysian Listed Firms By Hanifa, Mohamed Hisham; Masih, Mansur; Bacha, Obiyathulla
  11. Supply Chain Disruptions: Evidence from the Great East Japan Earthquake By Vasco M. CARVALHO; NIREI Makoto; SAITO Yukiko
  12. Can Aristotle Help Us Specify the Very Nature of Management Problem? By Marc Nikitin
  13. Business As Usual: New Jersey Employers’ Experiences with Family Leave Insurance By Sharon Lerner; Eileen Appelbaum

  1. By: Roberto Álvarez; Andrés Zahler
    Abstract: In this paper we analyze changes in the export mix of Chilean firms, looking particularly at differences between large firms and SMEs. To do that, we use detailed information of exported products by firms during the period 1995-2005. Our econometric results, which look at the impact of export product churning on firm performance, are heterogeneous by type of change in export mix and by firm size. In general, export mix changes are associated with improvements on productivity, although our results suggest that this positive effect is only for SMEs. In terms of employment and sales, we find that export product churning has positive effect on large firms and lower - and in some case negative - on SMEs. It seems that changes in export mix are more important for firm growth in large firms, but not in terms of productivity. In contrast, SMEs can have a higher potential for productivity improvement through export product churning but this does not translate necessarily in significant increase in sales and employment.
    Keywords: Integration & Trade, Productivity, SME, Small and Medium Size Enterprises (SMEs), Firm performance, Export mix, Large firms, New products, Product mix
    Date: 2014–04
  2. By: Andrew B. BERNARD; Andreas MOXNES; SAITO Yukiko
    Abstract: Firms operate in complex supplier-customer networks that potentially range over long distances. However, the effects of supplier networks and supplier location on firm performance are largely unknown. This paper characterizes the domestic production network in Japan using detailed buyer-supplier data on over 950,000 firms. Beyond describing the characteristics of the Japanese production network, the paper examines the geographic features of the network links. Greater geographic distance plays an important role in reducing the probability of buyer-seller relations between pairs of firms. For a given firm, greater distance is associated with better performance measures of suppliers and customers. Geography, the density, and the quality of network connections are strongly correlated with downstream (customer) firm performance. Labor productivity, credit score, and size of a downstream firm are positively correlated with features of its upstream supply base including the number of suppliers and their average performance. In addition, geographic proximity of a firm's suppliers is associated with improved firm performance. The paper also provides the first evidence on the relationship between supplier network connections and downstream firm outcomes. Firm performance is better when its suppliers have more suppliers of their own. However, firm performance is lower when its suppliers are connected to more downstream customers.
    Date: 2014–06
  3. By: ARATA Yoshiyuki
    Abstract: How a firm grows is one of the important themes in industrial organization literature. Recent empirical studies have demonstrated that the distribution of firms' growth rates is not Gaussian as predicted by the celebrated Gibrat's law (Gibrat, 1931), but rather is quite well fitted by the Laplace distribution. These findings challenge the existing theoretical models and also our understanding of the mechanism of firm growth. To explain the empirical distributions, we consider the firm growth dynamics in the framework of the L�vy process and infinitely divisible distributions. Our analysis shows that the growth of a firm does not result from the accumulation of small shocks as the existing models assume. Instead, it is characterized by a handful of large shocks to the firm, i.e., jumps. The result has important implications for our understanding of the nature of innovations.
    Date: 2014–06
  4. By: Dorothea Schäfer; Susan Steiner
    Abstract: This paper studies the association between a country's level of financial development and firms' employment growth. We employ an incomplete contract model for evaluating this association. The model proposes that a high level of financial development affects the employment of firms with low managerial capital negatively, while firms with high managerial capital benefit from a more developed financial system. We test this proposition with data from the Business Environment and Enterprise Performance Survey covering transition countries in Eastern Europe and Central Asia. We use firm size as a proxy for managerial capital. Our findings confirm a non-linear effect of financial development on firm employment. Specifically, the smallest firms' edge in employment growth over large firms is dampened when the level of financial development is higher, especially in countries at medium levels of financial development.
    Keywords: Financial development, employment, financial constraints, transition
    JEL: G20 G28 G30 J30
    Date: 2014
  5. By: Evan Starr; Natarajan Balasubramanian; Mariko Sakakibara
    Abstract: We examine the impact of enforcing non-compete covenants (CNC) on the formation and performance of new firms using matched employer-employee data on 30 US states. To identify the impact of CNC, we exploit the inter-state variation in CNC enforcement along with the fact that courts do not enforce such covenants between law firms and departing lawyers in any state. Using a difference-in-difference-in-difference specification with law firms and firms that are not withinindustry spinouts as the baseline, we find states with stricter CNC enforcement have fewer, but larger within-industry spinouts that are more likely to survive their nascent years, and conditional on survival, grow faster during those years. These results are consistent with CNC enforcement having a selection effect on within-industry spinouts. Particularly, with stricter enforcement, only founders with higher-quality ideas and resources choose to overcome CNC-related barriers, which reduces entry rate but increases observed short-term performance of these spinouts.
    Keywords: Covenants Not to Compete, Entrepreneurship, Spinouts
    JEL: L25 L26 L41 L5 K2 K3 J6 M2 M5
    Date: 2014–06
  6. By: McGuinness, Seamus; Ortiz, Luis
    Abstract: Using the employer-employee matched National Employment Survey of Ireland carried out in 2006, this paper compares the skill gaps as perceived by managers and employees located within the same firm. The paper looks at the main drivers of agreement/disagreement on the perception of skill gaps and considers the extent to which the way of measuring these gaps helps to explain outcome variables such as labour costs and training expenditures. The research finds that both human resource management processes and collective bargaining arrangements are important factors in facilitating agreement of training needs. Skill gaps were found to increase average training costs and average labour costs. Finally, the evidence suggests that employee perceptions of skill gaps may be prone to higher levels of subjective bias.
    Date: 2014–05
  7. By: Abdelkader Baaziz (IRSIC - Institut de Recherches en Sciences de l'Information et de Communication - Aix Marseille Université : EA4262); Luc Quoniam (IRSIC - Institut de Recherches en Sciences de l'Information et de Communication - Aix Marseille Université : EA4262)
    Abstract: The aim of this paper is to show the complexity of the political, legal, social and economic environments where the Algerian State-Owned Firms operate. These environments are qualified by "uncertainty" given the instability of the different parameters cited. Since 1988, Algeria has initiated deeper economic reforms supported by significant legislation and international agreements. In this uncertain environment, Algerian State-Owned Firm cannot rely only on their internal capabilities. They should, create partnerships, both with suppliers, subcontractors, universities and even competitors. There is a need for these firms to: Transform their organization to a new form improved for unexpected events and enough resilience to adapt to uncertain environments. Build a Strategic Intelligence Information System able to facilitate decision-making and reduce risks inherent to the strategic choices. Find ways to reverse choice when unexpected events occur. This article shows there is a need to handle the following risks: Inertia against the process of organizational transformation, wrong understanding of the received signals from the environment and poor reaction of the decision-maker to signals and events in the environment.
    Keywords: Strategic Intelligence Information System; Knowledge Management; Competitive Intelligence; Business Intelligence; Decision-making under Uncertainty; Risk
    Date: 2014–06–01
  8. By: Thi-Hong-Hanh Pham (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: This paper aims to advance in the knowledge of the economic impacts of ISO 50001 certification on firms' performance. The study hypothesizes that ISO 50001 is associated with improvements in market value of firms. We employ, on one hand, event study methodology for a sample of 40 companies listed on different stock exchanges. On the other hand, we use market reaction to the announcement of ISO 50001 as a proxy for changes in firm performance. We reveal that market reaction to the adoption of ISO 50001 is negative but statistically insignificant. However, this result is not suggesting that getting ISO 50001 is a bad investment, but rather that inflated expectations of financial performance improvement due to the adoption of ISO 50001 has still been unfounded.
    Keywords: Energy Management Systems; ISO 50001; Market value; Event study.
    Date: 2014–06–25
  9. By: Stefano CLÒ (DEMM, Università degli Studi di Milano, Italy); Chiara F. DEL BÒ (DEMM, Università degli Studi di Milano, Italy); Matteo FERRARIS (DEMM, Università degli Studi di Milano, Italy); Carlo FIORIO (DEMM, Università degli Studi di Milano, Italy); Massimo FLORIO (DEMM, Università degli Studi di Milano, Italy); Daniela VANDONE (DEMM, Università degli Studi di Milano, Italy)
    Abstract: This paper analyzes deals involving private and State-owned enterprises (SOEs) worldwide since 2004. We consider four types of deals: privatizations, publicizations, private reorganizations (i.e private firms acquiring a private target) and public reorganizations. (i.e. both acquirers and targets are SOEs). We study whether the predeal performance and corporate characteristics of the acquirer and target companies vary across the four types of deals depending on ownership: public or private. Data are taken from Zephyr, which provides information on completed deals worldwide and Orbis, a firm-level dataset. The empirical analysis suggests the following. Some results of previous literature on M&As performed by private firms (‘the inefficiency management hypothesis’) are both confirmed and expanded. Acquirers involved in deals are both larger and better performing than their targets but some qualifications are in order with respect to ownership. The difference in size and performance between acquirers and targets is in fact more pronounced for public with respect to private acquirers. The evidence thus points to an active role of SOEs as acquires, as they significantly out-perform relative to their targets, including private ones, in terms of return on sales. Given these novel findings, further research is needed to examine the motivations behind the different types of deals considered and to verify the role of ownership.
    Keywords: Publicization, Privatization, State-owned enterprises, M&As.
    JEL: L32 L22 G34
    Date: 2014–03
  10. By: Hanifa, Mohamed Hisham; Masih, Mansur; Bacha, Obiyathulla
    Abstract: Sukuk (Islamic debt securities) are dominating the Malaysian capital market with strong support from the government, mega-conglomerates and firms. Sukuk, as an important source of firms’ financing, is increasingly catching up with conventional bonds in terms of volume of transactions and number of sukuk issuances. However, from theoretical perspectives, it is still largely unknown why some firms may consider sukuk issuance while others consistently rely on conventional bond offers. In examining this corporate financing behavior, most studies employed a partial adjustment model to predict whether firm have an optimal debt ratio, in which they partially adjust towards it when they deviate from it, consistent with trade-off prediction. Thus, the objective of this paper is twofold: firstly, to test firm target debt optimizing behavior and secondly, to find firm specific determinants of target debt ratio using a sukuk or conventional bonds issuance4 dataset. Our sample consists of 120 conventional bonds and 80 sukuk issuers from the year 2000 until 2011. We employ two advanced dynamic panel data estimators5, which have resulted in three major findings. Firstly, our results provide stronger support for trade-off view based on firm optimizing behavior among sukuk and conventional bond issuers, however with different issuance motives. Secondly, issuers of partnership-based sukuk and convertible bonds follow closely pecking order view, in which, the former is chosen if firms face a higher information asymmetry cost. Finally, while both exchange-based sukuk and straight bond issuers aligning towards a particular target, only firm with higher sales growth prefer the former. As such, together with industry insights, we attribute our findings that sukuk offers bring unique “benefits” to the issuers that may not be available if conventional bonds are issued instead, although it is against traditional theoretical interpretation.
    Keywords: sukuk, conventional bonds, trade-off theory, pecking order theory
    JEL: C5 G3
    Date: 2014–06–28
  11. By: Vasco M. CARVALHO; NIREI Makoto; SAITO Yukiko
    Abstract: This paper quantifies the spillover effect of exogenous shocks, such as earthquakes, on other firms through the supply chain network. Combining micro data on inter-firm transaction networks and geographic information systems, we examine firms' sales growth and transaction relationships outside the tsunami-hit areas before and after the Great East Japan Earthquake. We find that sales growth shows a negative but insignificant effect for firms with suppliers in the affected areas and a negative and significant effect for firms with customers in the affected areas. When we focus on exiting firms in the affected areas as the firms from where the spillovers originated, the sales growth of linked firms outside the affected areas exhibits negative and significant effects for both upstream and downstream firms. Furthermore, significantly negative effects on downstream firms are shown for not only directly linked firms but also indirectly linked firms, with two and three degrees of separation. Finally, we find that firms tend to establish new transactions when they have transaction partners in the affected areas.
    Date: 2014–06
  12. By: Marc Nikitin (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)
    Abstract: The question we address here is: "What is the very nature of managerial problems?". We first argue that real management problems, as opposed to technical problems, are those which do not have "a priori" solutions and for which the arguments for and against any important decision are more or less of equal weight. We then define managerial problems as recurrent dilemmas. Drawing on Aristotle's distinction between theoretical and practical sciences, we then try to analyze the consequences of the previous definition on an epistemological and a pedagogical point of view.
    Keywords: management ; managerial problem ; epistemology ; Aristotle
    Date: 2014–06–25
  13. By: Sharon Lerner; Eileen Appelbaum
    Abstract: This study examines New Jersey employers’ experiences with employees who need time off to care for a seriously ill child or family member or to bond with a new baby since 2009, when the state began offering paid family leave through the statewide Family Leave Insurance (FLI) program. This program builds on the state’s Temporary Disability Insurance (TDI) Program, which has been in place since 1948 and has covered maternity leave since 1970. Since 2009, New Jersey has provided benefits for more than 100,000 FLI leaves, the vast majority of which were used for the care of new babies. This study examines how this relatively new, statewide program has affected employers’ processes for administering and managing employee leaves. Does the program generate excessive paperwork, for instance, or burden employers in other ways? Is the program being abused, as some initially feared? And how, if at all, has it helped employers?
    Keywords: family leave, medical leave, family leave insurance, new jersey
    JEL: I I1 H J J8 J83 J88 J3 J33 J38
    Date: 2014–06

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