nep-bec New Economics Papers
on Business Economics
Issue of 2014‒11‒17
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. A note on the effect of consumer protection requirements on firm strategy By Huric Larsen, Jesper Fredborg
  2. Firm age and the margins of international trade: Comparable evidence from five European countries By Wagner, Joachim
  3. Import competition, productivity and multi-product firms By Emmanuel Dhyne; Amil Petrin; Valerie Smeets; Frederic Warzynski
  4. Instrumental Variable Estimates of the Effect of Management Practices on Firm Performance in Korean Firms By Kang, Youngho; Chang, Jieun
  5. The Role of Managerial Work in Market Performance: A Monopoly Model with Team Production By Hildenbrand, Andreas; Duran, Mihael
  6. The Development of Human Resource Management and its Effect on Turnover Rate in Family Firm(in Japanese) By Tsukasa MATSUURA; Tomohiko NODA
  7. International competition and firm performance : Evidence from Belgium By Jan De Loecker; Catherine Fuss; Johannes Van Biesebroeck
  8. Liquidity Premia, Price-Rent Dynamics, and Business Cycles By Miao, Jianjun; Wang, Pengfei; Zha, Tao
  9. Firm-Size Wage Gaps along the Formal-Informal Divide: Theory and Evidence By Balkan, Binnur; Tumen, Semih
  10. The EU Leniency Programme and Recidivism By Marvao, Catarina
  11. How do firms disclose environmental information on climate change in aspects of both business risks and opportunities? By Honami Sakaguchi; Michiyuki Yagi; Katsuhiko Kokubu
  12. Product Sophistication and Spillovers from Foreign Direct Investment By Katharina Eck; Stephan Huber
  13. Does mandating nondiscrimination in hiring practices influence women's employment ? evidence using firm-level data By Amin, Mohammad; Islam, Asif

  1. By: Huric Larsen, Jesper Fredborg
    Abstract: The effect of consumer protection on firms’ strategy choices in a market with perfect competition is examined in a simple model. It is found that consumer protection may lead to reduced product quality and adverse effects on firm survival.
    Keywords: Strategy, consumer protection, firm incentives
    JEL: B21 L6 L8
    Date: 2014–02
  2. By: Wagner, Joachim (Leuphana University Lueneburg, Germany, and CESIS, KTH Stockholm, Sweden)
    Abstract: This note uses comparable representative data for manufacturing firms from five European countries (Germany, France, Italy, Spain, and the United Kingdom) to investigate the links between firm age and the participation of the firms in export, the share of exports in total sales, the number of countries exported to, and the participation in import. The big picture revealed is in line with the theoretical considerations. Older firms tend to be more often exporters and importers, they export to more different destination countries, and they export a higher share of their total sales in three out of five countries.
    Keywords: Exports; imports; firm age; trade margins; EFIGE data
    JEL: F14
    Date: 2014–09–24
  3. By: Emmanuel Dhyne (NBB, UMons); Amil Petrin (U. Minnesota); Valerie Smeets (Aarhus U.); Frederic Warzynski (Aarhus U.)
    Abstract: Using detailed firm-product level quarterly data, we develop an estimation framework of a Multi-Product Production Function (MPPF) and analyse firm-product level TFP estimations at various levels (industries, products). After documenting our estimation results, we relate productivity estimates with import competition, using firm and product level measures of import competition. We find that if productivity at the firm level tends to positively react to increased import competition, the multi-product firms response varies according to the relative importance of the product that faces stronger import competition in the firm’s product portfolio. When import competition associated to the main product of a firm increases, the firm tend to increase its efficiency in producing that core product, in which it has a productivity advantage. However, when the degree of foreign competition increases for non core products of a firm, it tends to lower its efficiency in producing those goods.
    Keywords: multi-product production function, productivity, import competition
    JEL: D24 L22 L25
    Date: 2014–10
  4. By: Kang, Youngho; Chang, Jieun
    Abstract: To empirically examine the unbiased effect of management practice on firm productivity, this paper aims to suggest an instrumental variable approach, which requires less costly method. This study uses three firm-level instrumental variables such as the motivations for organizational reform, empowerment, and IT investment during the organizational reform. For empirical study, we use Korean manufacturing firm-level data that contains information on management score and financial statement. The results of the instrumental variable estimation show that better management practice leads to higher level of firm productivity statistically significantly, while the effect of management practices is statistically insignificant in the ordinary least square estimation.
    Keywords: Management practices, Productivity, Organizational reform, Instrumental variable
    JEL: C26 L2 M2
    Date: 2014–09–04
  5. By: Hildenbrand, Andreas; Duran, Mihael
    Abstract: A monopolist is treated as a nexus of contracts with team production. It has one owner-manager who is the employer of two employees. A team production problem is present if the employer is a “managerial lemon.†If the team production problem is solved, the employer is a “managerial hotshot.†Both managerial hotshot and managerial lemon are found to make profit. Therefore, managerial slack can exist in our monopoly market. Whereas the employer has the incentive to improve management capability in principle, the employees have the incentive to keep management capability low. Moreover, the cost of improving management capability may be prohibitively high. Consequently, managerial slack can persist. The predicted behavior of the monopolist contradicts the neoclassical prediction of market performance in both cases.
    Keywords: firm organization; market structure; property rights
    JEL: C7 D2 D4 L1 L2
    Date: 2014–09–15
  6. By: Tsukasa MATSUURA; Tomohiko NODA
    Abstract: This paper examines the hypothesis that human resource management is less developed in family firms than in non-family firms and it has no effect of lowering turnover in family firms. From our analysis, the following main findings were obtained. First, compared to non-family firms, turnover rates and average length of service are higher in family firms, although the difference is not statistically significant for average length of service. Second, the institutions for human resource management are more developed in non-family firms than in family firms, although the coefficient is not significant in the case of bonus and reappointment of a person who has mandatorily retired. Third, human resource management lowers turnover rate, when the systems of periodic salary increase and training for manager are introduced in non-family firms which earn over 100 million yen sales, or hire over 100 employees, but it does not in family firms. Fourth, labor union lowers turnover rate in non-family firms which earn over 100 million yen sales, or hire over 100 employees, but it does not in family firms. Fifth, the systems of bonus and reappointment lower turnover rate in family firms which earn fewer than 100 million yen sales, or hire fewer than 100 employees. Finally, the negative correlation between the number of employee and turnover rates disappears when controlling the systems of human resource management. These results show that the development of human resource management and its effect on turnover rate differ between family firms and non-family firms.
    Date: 2013–01
  7. By: Jan De Loecker (Princeton University, NBER and CEPR); Catherine Fuss (National Bank of Belgium and Université Libre de Bruxelles); Johannes Van Biesebroeck (University of Leuven and CEPR)
    Abstract: We evaluate the impact of international competition on firm-level perfor- mance in Belgium. In the manufacturing sector we consider both the impact of global competition through measures of import penetration and the impact of within-EU competitiveness using measures of relative labor cost. In selected manufacturing sectors we identify the strength of international competition through a firm's proximity to the border. In both instances, we consider the impact on a variety of performance dimensions to learn about the mechanisms and about firms' adjustment to these competitive pressures
    Keywords: Efficiency; Markup; Competition, Import penetration
    Date: 2014–10
  8. By: Miao, Jianjun (Boston University); Wang, Pengfei (Hong Kong University of Science and Technology); Zha, Tao (Federal Reserve Bank of Atlanta)
    Abstract: n the U.S. economy during the past 25 years, house prices exhibit fluctuations considerably larger than house rents, and these large fluctuations tend to move together with business cycles. We build a simple theoretical model to characterize these observations by showing the tight connection between price-rent fluctuation and the liquidity constraint faced by productive firms. After developing economic intuition for this result, we estimate a medium-scale dynamic general equilibrium model to assess the empirical importance of the role the price-rent fluctuation plays in the business cycle. According to our estimation, a shock that drives most of the price-rent fluctuation explains 30 percent of output fluctuation over a six-year horizon.
    Keywords: asset pricing; financial frictions; working capital; cutoff productivity; heterogeneous firms; endogenous TFP; house price; liquidity constraint
    JEL: E22 E32 E44
    Date: 2014–08–01
  9. By: Balkan, Binnur; Tumen, Semih
    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: 2014–09–01
  10. By: Marvao, Catarina (Trinity College Dublin)
    Abstract: The EU Leniency Programme (LP) aims to encourage the dissolution of existing cartels and the deterrence of future cartels, through spontaneous reporting and/or significant cooperation by cartel members during an investigation. However, the European Commission guidelines are rather vague in terms of the factors that influence the granting and scale of fine reductions. As expected, the results shown that the first reporting or cooperating firm receives generous fine reductions. More importantly, there is some evidence that firms can “learn how to play the leniency game”, either learning how to cheat or how to report, as the reductions given to multiple offenders (and their cartel partners) are substantially higher. These results have an ambiguous impact on firms’ incentives and major implications for policy making.
    Keywords: Cartels; competition policy; Leniency Programme; self-reporting
    JEL: K21 K42 L40 L51
    Date: 2014–09–07
  11. By: Honami Sakaguchi (Student of Graduate School of Business Administration, Kobe University); Michiyuki Yagi (Interfaculty Initiative in the Social Sciences, Kobe University); Katsuhiko Kokubu (Graduate School of Business Administration, Kobe University)
    Abstract: Corporate disclosure of environmental information has played an important role in the avoidance of dangerous climate change. How firms choose to disclose environmental information about the business opportunities and risks associated with climate change is important to policy makers and investors. In the literature, there are two dominant theories of corporate disclosure: legitimacy theory and voluntary dis-closure theory. Under legitimacy theory, firms are more likely to disclose information in response to their risks; under voluntary disclosure theory, firms are more likely to disclose information in response to their opportunities. In certain industries, if firms disclose environmental information according to legitimacy theory (voluntary disclosure theory), society may be unaware of the true risks (opportunities) of climate change, and society, in these cases, we will need policies that mandate disclosure. Therefore, this study examines the power of legitimacy theory and voluntary disclosure theory to explain corporate disclosure in three industry groupings: manufacturing, non-manufacturing, and energy & utilities. We use Bloomberg’s Carbon Disclosure Project (CDP) dataset of 3,861 firm level observations from 2008-2012, and regress the corporate social disclosure score evaluated by Bloomberg on variables that indicate regulatory and physical risks and opportunities. We find that legitimacy theory does not explain corporate disclosure of regulatory risks in any of the industries and that of physical risk in the energy and utilities industry. In addition, vol-untary disclosure theory does not explain disclosure of regulatory opportunities in the energy & utilities industries. However, voluntary disclosure theory explains disclosure of opportunities in all of the industries.
    Keywords: Legitimacy theory, Voluntary disclosure theory, disclosure score, climate change, CDP
    Date: 2014–10
  12. By: Katharina Eck (University of Munich); Stephan Huber
    Abstract: Foreign direct investment (FDI) in developing countries is often associated with higher economic growth due to knowledge and technology spillovers to local firms. One way how FDI speeds up growth is that it facilitates the manufacturing of more sophisticated products by local firms. So far, firm-level evidence is missing on how the presence of multinational firms affects the product sophistication of firms in a developing country. This paper aims to fill this gap. We compile an extensive firm-product-level dataset of Indian manufacturing firms which we complement with information on product sophistication and spillovers from FDI. We then explore different channels through which spillovers from multinationals to local Indian firms foster the manufacturing of sophisticated products. We find evidence that spillovers through supplier linkages strongly increase the manufacturing of sophisticated products in India.
    Keywords: Multinational Firms, Spillovers, Sophistication, Technological Change
    JEL: F23 O1 O3
    Date: 2014–05
  13. By: Amin, Mohammad; Islam, Asif
    Abstract: This study explores the relationship between mandating a nondiscrimination clause in hiring practices along gender lines and the employment of women versus men in 58 developing countries. The study finds a strong positive relationship between a nondiscrimination in hiring clause and women's relative to men's employment. The relationship is robust to several controls at the firm and country levels. The results also show sharp heterogeneity in the relationship between the nondiscrimination in hiring clause and women's versus men's employment, with the relationship being much larger in richer countries and in countries with more women in the population as well as among relatively smaller firms.
    Keywords: Population Policies,Gender and Law,Gender and Development,Gender and Health,Human Rights
    Date: 2014–10–01

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