nep-bec New Economics Papers
on Business Economics
Issue of 2014‒08‒09
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Accounting for Job Growth: Disentangling Size and Age Effects in an International Cohort Comparison By Michael Anyadike-Danes; Carl-Magnus Bjuggren; Sandra Gottschalk; Werner Hölzl; Dan Johansson; Mika Maliranta; Anja Myrann
  2. Size, Age and the Growth of Firms: New Evidence from Quantile Regressions By Roberta Distante; Ivan Petrella; Emiliano Santoro
  3. Who Takes Advice? Firm Size Threshold, Competence, Concerns and Informality in a Contingency Approach By Kevin Mole; Robert Baldock; David North
  4. Fixed Export Costs and Export Behavior By Luis Castro; Ben Li; Keith Maskus; Yiqing Xie
  5. Why Are Black-Owned Businesses Less Successful than White-Owned Businesses?  The Role of Families, Inheritances, and Business Human Capital By Fairlie, Robert
  6. The Kreps-Scheinkman game in mixed duopolies By Bakó, Barna; Tasnádi, Attila
  7. Corporate governance and transaction cost economics: A study of the equity governance structure By Jimmy A. Saravia; Silvia Saravia-Matus
  8. Entrepreneurial families and households By Gry Agnete Alsos; Sara Carter; Elisabet Ljunggren
  9. Urban Vibrancy and Corporate Growth By Casey Dougal; Christopher A. Parsons; Sheridan Titman
  10. Leverage versus volatility: Evidence from the Capital Structure of European Firms By el Alaoui, AbdelKader; Masih, Mansur; Bacha, Obiyathulla; Asutay, Mehmet

  1. By: Michael Anyadike-Danes (Aston Business School); Carl-Magnus Bjuggren (Linköping University, Sweden); Sandra Gottschalk (The Centre for European Economic Research (ZEW) in Mannheim); Werner Hölzl (WIFO, Austria); Dan Johansson (Hui Research); Mika Maliranta (The Research Institute of the Finnish Economy (ETLA)); Anja Myrann (Ragnar Frisch Centre for Economic Research, Norway)
    Abstract: The contribution of different-sized businesses to job creation continues to attract policymakers’ attention, however, it has recently been recognized that conclusions about size were confounded with the effect of age. We probe the role of size, controlling for age, by comparing the cohorts of firms born in 1998 over their first decade of life, using variation across half a dozen northern European countries Austria, Finland, Germany, Norway, Sweden, and the UK to pin down size effects. We find that a very small proportion of the smallest firms play a crucial role in accounting for cross-country differences in job growth. A closer analysis reveals that the initial size distribution and survival rates do not seem to explain job growth differences between countries, rather it is a small number of rapidly growing firms that are driving this result.
    Keywords: birth cohort, firm age, firm size, firm survival, firm growth
    JEL: L25 E24 M13
    Date: 2013–05–02
  2. By: Roberta Distante (Fondazione Eni Enrico Mattei, Milan, Italy); Ivan Petrella (University of London, UK); Emiliano Santoro (Catholic University of Milan, Italy and University of Copenhagen, Denmark)
    Abstract: The nexus between firm growth, size and age in U.S. manufacturing is examined through the lens of quantile regression models. A number of interesting features are unveiled that linear frameworks could not detect. Size pushes both low and high performing firms towards the median rate of growth, while age is never advantageous, and more so as firms grow faster.
    Keywords: Firm Growth, Size, Age, Conditional Quantile
    JEL: C14 L1
    Date: 2014–07
  3. By: Kevin Mole (Warwick University Business School); Robert Baldock (Middlesex University Business School); David North (Middlesex University Business School)
    Abstract: Although they are not the only conduit for knowledge, advisers can diffuse new methods, knowledge and best practice to SMEs Existing work suggests advice as a resource available for the small firm manager. Whether the manager takes that advice depends on the trust between owner-manager and adviser, the degree to which the owner-manager perceives themselves to need advice, the ‘knowledge gap hypothesis’ and the degree to which they feel able to interact with advisers and implement advice. In this paper, we model whether a small firm manager takes advice from formal sources, including public and private suppliers.
    Keywords: business advice, small business, SME policy, SME management, small firms
    JEL: M10 L53
    Date: 2013–09–01
  4. By: Luis Castro (Universidad Privada Boliviana, LaPaz, Boliviana); Ben Li (Boston College); Keith Maskus (University of Colorado at Boulder); Yiqing Xie (Fudan University, Shanghai, China)
    Abstract: This paper provides a direct test of how fixed export costs and productivity jointly determine firm-level export behavior. Using Chilean data, we construct indices of fixed export costs for each industry-region-year triplet and match them to domestic firms. Our empirical results show that firms facing higher fixed export costs are less likely to export, while those with higher productivity export more. These outcomes are the foundation of the widely-used sorting mechanism in trade models with firm heterogeneity. A particularly novel finding is that high-productivity nonexporters face greater fixed export costs than low-productivity exporters. We also find that the substitution between fixed export costs and productivity in determining export decisions is weaker for firms with higher productivity. Finally, both larger fixed export costs and greater within-triplet productivity dispersion raise the export volume of the average exporter.
    Keywords: Sorting, firm heterogeneity, fixed export costs
    JEL: F10 F12 F14
    Date: 2014–07–19
  5. By: Fairlie, Robert
    Abstract: Using confidential microdata from the Characteristics of Business Owners, we examine why African-American owned businesses lag substantially behind white-owned businesses in sales, profits, employment, and survival.  Black business owners are much less likely than white owners to have had a self-employed family member owner prior to starting their business and are less likely to have worked in that family member's business.  Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.
    Keywords: Business, entrepreneurship, black business, human capital, business human capital, inequality, race
    Date: 2014–08–06
  6. By: Bakó, Barna; Tasnádi, Attila
    Abstract: In this paper we extend the results of Kreps and Scheinkman (1983) to mixedduopolies. We show that quantity precommitment and Bertrand competition yield Cournot outcomes not only in the case of private firms but also when a public firm is involved.
    Keywords: Mixed duopoly, Cournot, Bertrand-Edgeworth
    JEL: D43 H44 L13 L32
    Date: 2014–07–15
  7. By: Jimmy A. Saravia; Silvia Saravia-Matus
    Abstract: This paper examines the Transaction Cost Economics (TCE) theory of capital structure and finds that for the case of equity the usual TCE logic is not fully worked out. In particular, an analysis of the key issue of bilateral dependency between the firm and its shareholders is absent. To fill this gap in the literature, the paper further develops the theory of the equity governance structure by taking account of the concept of bilateral dependency over the lifecycle of the firm. The paper finds that, both theoretically and empirically, contractual hazards are indeed mitigated for the case of fast growing young firms which are dependent on shareholders to finance future growth. In contrast, for the case of mature firms, which in virtue of their large free cash flows are independent from shareholders, contractual safeguards are altered to the disadvantage of shareholders and consequently managerial discretion costs increase.
    Keywords: Corporate Governance, Transaction Cost Economics, Free Cash flows, Firm Valuation
    JEL: D23 G31 G32 G34
    Date: 2014–05–12
  8. By: Gry Agnete Alsos (University of Nordland); Sara Carter (Strathclyde Business School); Elisabet Ljunggren (Nordland Research Institute)
    Abstract: This paper considers the entrepreneur within the context of the family and the household. We explore how families and households interact with and influence business decisions, and give equal prominence to the role of family strategies as well as to business strategies in understanding the development of the family in business. Household and family are distinctive concepts that partly overlap; a focus on the household allows consideration of economic activities, work and residence, while a focus on the family is confined to issues such kinship and marriage relationships that bind together individuals. The paper explores the relationship between the household and the enterprise, drawing attention to the intricate relationship that exists between the two spheres. Although entrepreneurship researchers have rarely discussed the role of the household in business decisions, disciplines such as sociology and anthropology have provided valuable insights into the nature of household dynamics and kinship. These factors are known to have a profound influence on both the tangible and intangible resources available to entrepreneurial ventures. This paper addresses some of the omissions of the entrepreneurship subject domain by focusing attention on household dynamics, kinship relations and the role of the household in recognizing opportunities and providing resources to new and existing ventures.
    Keywords: family entrepreneurship, households, portfolio businesses, rural and farm-based enterprise
    JEL: I31 L25 L26
    Date: 2013–10–01
  9. By: Casey Dougal; Christopher A. Parsons; Sheridan Titman
    Abstract: We find that a firm's investment is highly sensitive to the investments of other firms headquartered nearby, even those in very different industries. It also responds to fluctuations in the cash flows and stock prices (q) of local firms outside its sector. These patterns do not appear to reflect exogenous area shocks such as local shocks to labor or real estate values, but rather suggest that local agglomeration economies are important determinants of firm investment and growth.
    JEL: G3 G31 R10 R12
    Date: 2014–07
  10. By: el Alaoui, AbdelKader; Masih, Mansur; Bacha, Obiyathulla; Asutay, Mehmet
    Abstract: The capital structure theory advocates a mix between debt and equity to optimize a firm‘s value (Modigliani & Miller, 1958). However, Islamic finance recognizes more conservative levels of debt for firms, based not on capital structure, but on debt to total assets or debt to market capitalization. This study is the first attempt to investigate the role of leverage in affecting the returns and the firm‘s share price volatility in relation to an Islamic finance perspective (IFP). The paper is based on a sample of 320 European companies distributed into different portfolios with high and low debt, high and low assets and focused on ten different countries. Comparative portfolio analysis was used to obtain a number of testable hypotheses, which specify the factors at the level of the firm and at the level of the market, in order to determine optimal financial risk. Specifically, we use the mean variance efficient frontier (MVEF) to confirm, in accordance with the theory, that a portfolio with a higher capital structure has higher volatility and lower returns compared to a portfolio with a lower capital structure. Then, the Shari‘ah screening method of improving the firm‘s stability in the market has been analyzed based on econometric analysis. Dynamic GMM is used in order to correlate the firm‘s leverage to total assets with its return and volatility in portfolios with high and low capital structure. To ensure the robustness of results, the business cycle effects have been considered after adding the firm and the country characteristics with a view to taking into account the heterogeneity across different firms and different markets. The preliminary results tend to indicate that there are significant correlations between capital structure and both returns and volatility, but not necessarily with high debt to assets given different sizes and growth of firms. The paper suggests that are three main factors which need to be considered by the firms in order to improve their stability in the market: firstly, the level of capital structure but not the debt to total assets as suggested by some scholars using the IFP; secondly, the capitalization or the firm size and finally, the level of the sovereign debt and country dynamics. Although the latter may be beyond the firm‘s control, it is up to the firm to consider its own market with implications on its leverage policy in relation to the frequency-dependent strategy.
    Keywords: Volatility, leverage, dynamic GMM, Wavelet Time–frequency analysis
    JEL: C22 C58 E44 G15
    Date: 2014–06–23

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