nep-bec New Economics Papers
on Business Economics
Issue of 2014‒09‒29
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Foreign Market Experience, Learning by Hiring and Firm Export By Jaan Masso; Kärt Rõigas; Priit Vahter
  2. What Most Affects A Firm' s Costs: Internal or External Factors, or Both? By Fumitoshi Mizutani; Eri Nakamura
  3. Job creation, firm creation, and de novo entry By Karen GEURTS; Johannes VAN BIESEBROECK
  4. Managerial Optimism and Debt Contract Design: The Case of Syndicated Loans By Adam, Tim R.; Burg, Valentin; Scheinert, Tobias; Streitz, Daniel
  5. Fragmenting global business processes: A protection for proprietary information By Julien Gooris; Carine Peeters
  6. Productivity spillovers of organization capital By Inklaar, Robert Christiaan; Chen, Wen
  7. Albert Aftalion and Business Cycle Theory: A Note By K.Vela Velupillai; Ragupathy Venkatachalam; Stefano Zambelli
  8. Firm-Size Wage Gaps along the Formal-Informal Divide : Theory and Evidence By Binnur Balkan; Semih Tumen
  9. Sickness Absende and Works Councils - Evidence from German Individual and Linked Employer-Employee Data By Daniel Arnold; Tobias Brändle; Laszlo Goerke

  1. By: Jaan Masso; Kärt Rõigas; Priit Vahter
    Abstract: Export experience of managers and other top specialists is among the key drivers of export decisions in firms. We show evidence of this regularity based on employer-employee level data from the manufacturing industry in Estonia. We find that hiring managers and other high-wage employees with prior experience in exporting to a specific geographical region is associated with a higher probability of export entry to that region. However, there is little evidence of significant effects on export intensity. Notably, the relationship between export experience and a firm’s export decisions is usually stronger if the prior export experience is from an exporter that is located nearby in the product space. Our findings suggest that the contribution of prior trade experience of employees and the firm’s productivity as drivers of export market entry are of comparable magnitude.
    Keywords: export experience, export entry, labour mobility, learning-to-export
    JEL: F10 F14 J31
    Date: 2014–09–16
  2. By: Fumitoshi Mizutani (Graduate School of Business Administration, Kobe University); Eri Nakamura (Graduate School of Business Administration, Kobe University)
    Abstract: The main purpose of this study is to investigate what kind of internal and external factors most affect a firm' s costs. We consider governance structure and business diversification strategy as internal factors and regulation and competition as external factors. By using 358 observations comprised of Japanese firms from public utility and manufacturing industries from 1989 to 2002, we estimate the translog cost function. The main findings are as follows: (i) The governance factor has an important effect on a firm' s cost structure. As the ratio of foreign shareholders increases and there is more dependence on one main bank, the costs of a firm decrease. (ii) The rate of increase in total costs for diversification is relatively low. A 1% increase in business segments leads to only a 0.1 or 0.2% increase in total costs. (iii) The regulation factor does not affect the cost structure. (iv) Compared with the regulation factor, the competition factor shows a quite clear effect on a firm's cost reduction. Overall, our empirical result suggests that governance structure as an internal factor and competition as an external factor are especially important for cost reduction.
    Keywords: Governance, Diversification Strategy, Regulation, Competition, Japanese Firms
    Date: 2014
  3. By: Karen GEURTS; Johannes VAN BIESEBROECK
    Abstract: Firm turnover and growth recorded in administrative data sets differ from underlying firm dynamics. By tracing the employment history of the workforce of new and disappearing administrative firm identifiers, we can accurately identify de novo entrants and true economic exits, even when firms change identifier, merge, or split-up. For a well-defined group of new firms entering the Belgian economy between 2004 and 2011, we find highly regular post-entry employment dynamics in spite of the volatile macroeconomic environment. Exit rates decrease with age and size. Surviving entrants record high employment growth that is monotonically decreasing with age in every size class. Most remarkably, we find that Gibrat’s law is violated for very young firms. Conditional on age, the relationship between employment growth and current size is strongly and robustly positive. This pattern is obscured, or even reversed, when administrative entrants and exits are taken at face value. De novo entrants’ contribution to job creation is relatively small and not very persistent, in particular for (the large majority of) new firms that enter with fewer than five employees.
    Date: 2014–08
  4. By: Adam, Tim R.; Burg, Valentin; Scheinert, Tobias; Streitz, Daniel
    Abstract: We examine the impact of managerial optimism on the inclusion of performance-pricing provisions in syndicated loan contracts (PSD). Optimistic managers may view PSD as a relatively cheap form of financing given their upwardly biased expectations about the firm’s future cash flow. Indeed, we find that optimistic managers are more likely to issue PSD, and choose contracts with greater performance-pricing sensitivity than rational managers. Consistent with their biased expectations, firms with optimistic managers perform worse than firms with rational managers after issuing PSD. Our results indicate that behavioral aspects can affect contract design in the market for syndicated loans.
    Keywords: Optimism Bias; Performance-Sensitive Debt; Debt Contracting; Syndicated Loans
    JEL: G02 G30 G31 G32
    Date: 2014–07–23
  5. By: Julien Gooris; Carine Peeters
    Abstract: With the progress of information and communication technologies, the cost and efforts to remotely exchange information have drastically fallen. It has created new opportunities to leverage comparative advantages by reorganizing value chains along the geographic dimension and by reconsidering the organizational boundaries of the firm (i.e. the governance model of operations). However the global disaggregation of the firm’s processes tends to increase the dispersion of firm’s proprietary information and knowledge across locations and intermediate producers. Firms are potentially exposed to higher levels of misappropriation hazard and forced to elaborate protection strategies to mitigate that risk. This study shows that firms adjust the fragmentation of activities entrusted to foreign services production units to adapt their information and knowledge protection strategy to the availability of strong legal protection (from the local institutions) or internal control mechanisms. We hypothesize and empirically support that, when the above mechanisms are not available, firms use the substitute protection mechanism of fragmenting global business processes across multiple services production units. Through their capabilities to integrate the multiple fragments that compose production processes, firms can exploit the complementarities between these fragments while reducing the misappropriation hazard of individual fragments. We find also that the propensity to turn to this alternative protection mechanism increases with firm’s host country specific experience and with the alternative value of the proprietary information.
    Keywords: Fragmentation;Misappropriation;Services;Information;Institutional environment;Outsourcing
    JEL: F23 O34 L8
    Date: 2014–09
  6. By: Inklaar, Robert Christiaan; Chen, Wen (Groningen University)
    Abstract: Investments in organization capital may impact productivity of not just the investing firm but could also spillover to other firms ? like investments in research and development. In this paper, we test whether there are (positive) know-how spillovers and (negative) business-stealing productivity spillovers for a panel of 1266 U.S. manufacturing firms over the period 1982?2011. We only find evidence of negative spillovers on product-market rivals. This implies that firms invest more in organization capital than would be socially optimal and that existing estimates of the importance of organization capital for productivity growth are overstated.
    Date: 2014
  7. By: K.Vela Velupillai; Ragupathy Venkatachalam; Stefano Zambelli
    Date: 2014
  8. By: Binnur Balkan; Semih Tumen
    Abstract: Observationally equivalent workers are paid higher wages in larger firms. This fact is often named as the “firm-size wage gap” and is regarded as a key empirical puzzle. Using micro-level data from Turkey, we document a new stylized fact : the firm-size wage gap is more pronounced for informal (unregistered) jobs than for formal (registered) jobs. To explain this fact, we develop a two-stage wage-posting game with market imperfections and segmented markets, the solution to which produces wages as a function of firm size in a well-defined subgame-perfect equilibrium. The model proposes two explanations. First, taxes on formal employment generate a wedge between formal and informal size wage gaps. Thus, government policy can potentially affect the magnitude of the firm-size wage gaps. The second explanation features a market-based framework with strategic interactions. Relative to small firms, large firms typically post higher wages for both formal and informal jobs they open. A high-wage formal job attracts a larger pool of applicants than a high-wage informal job. The larger pool of applicants for the formal job, in turn, allows the firm to somewhat lower the initial wage offer, while this second-round effect is negligible for informal jobs. As a result, size differentials are lower in formal jobs than informal jobs. We argue that the observed patterns in the use of social connections in job search and heterogeneity in job preferences can be used to justify the validity of this second mechanism.
    Keywords: Firm size, Wage gap, Informal job, Wage posting, Subgame perfection, Taxes, Social networks
    JEL: C78 J21 J31 L11
    Date: 2014
  9. By: Daniel Arnold; Tobias Brändle; Laszlo Goerke
    Abstract: Using both household and linked employer-employee data for Germany, we assess the effects of non-union representation in the form of works councils on (1) individual sickness absence rates and (2) a subjective measure of personnel problems due to sickness absence as perceived by a firm's management. We find that the existence of a works council is positively correlated with the incidence and the annual duration of absence. We observe a more pronounced correlation in western Germany which can also be interpreted causally. Further, personnel problems due to absence are more likely to occur in plants with a works council.
    Keywords: Absenteeism, LIAB, personnel problems, sickness absence, SOEP, works councils
    JEL: J53 I18 M54

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