nep-bec New Economics Papers
on Business Economics
Issue of 2014‒11‒22
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Expanding the Horizon: An Empirical Study of Sustainable Supply Chain Management and Firm Performance By Xichen Sun; Michiyuki Yagi; Katsuhiko Kokubu
  2. Incentive for adoption of new technology in duopoly under absolute and relative profit maximization By Hattori, Masahiko; Tanaka, Yasuhito
  3. Customer-base concentration, profitability and distress across the corporate life cycle By Irvine, Paul; Park, Shawn Saeyeul; Yildizhan, Celim
  4. When arm’s length is too far. Relationship banking over the business cycle By Beck, Thorsten; Degryse, Hans; De Haas, Ralph; van Horen , Neeltje
  5. Post-shakeout Performance, Survivor Bias and the Meaning of Success By Ralitza Nikolaeva
  6. Venture Capital Networks and Investment Performance in China By Zhiyang Liu; Zhiqi Chen
  7. New Business Formation and the Productivity of Manufacturing Incumbents: Effects and Mechanisms By Michael Fritsch; Javier Changoluisa
  8. Strategic Subsidy Policies with Endogenous Choice of Competition Mode By Lim, Seonyoung; Choi, Kangsik
  9. When firms and industries matter: understanding the sources of productivity growth By Ulf Lewrick; Lukas Mohler; Rolf Weder
  10. Should the host economy invest in a new industry? The roles of FDI spillovers, development level, and heterogeneity of firms By Huu Thanh Tam Nguyen; Ngoc-Sang Pham
  11. Flattening Firms and Wage Distribution By Jin, Xin
  12. Innovation and imitation incentives in dynamic duopoly By Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno

  1. By: Xichen Sun (Student of Graduate School of Business Administration, Kobe University); Michiyuki Yagi (Interfaculty Initiative in the Social Science, Kobe University); Katsuhiko Kokubu (Graduate School of Business Administration, Kobe University)
    Abstract: As global competition is getting more and more intense, there is an increasing trend manifesting the increasing interest in sustainable supply chain management. This study introduces four sustainable supply chain indicators from the upstream (supplier), middle stream (focal firm) and downstream (customer) of a supply chain to empirically examine the relationship between sustainable supply chain performance and firm performance (ROA), as well as the relationship between environmental efficiency and other three indicators. It focuses on the Energy and Utilities industries. In this study we use global firm dataset from Bloomberg professional service, and the number of observation is 86 during 2005 to 2013. We find an inversely U-shaped curve relationship between environmental efficiency in supply chain and firm' s profitability (ROA); and a U-shaped relationship between investments in operational sustainability and firm' s profitability. Also a negative relationship is found between having a new product and ROA. We provide implications obtained from our analysis of regression results for managers. We contribute to the literature by responding to the call for more empirical research in this filed, providing the evidence that sustainable supply chain performance can bring actual benefits for the firm, as long as firms identify their own position accurately and take the right action.
    Keywords: sustainable supply chain, environmental efficiency, new product, firm performance
    Date: 2014–10
  2. By: Hattori, Masahiko; Tanaka, Yasuhito
    Abstract: We present an analysis about adoption of new technology by firms in a duopoly with differentiated goods under absolute and relative profit maximization. Technology itself is free, but each firm must expend a fixed set-up cost, for example, for education of its staff. Under absolute profit maximization there are three types of sub-game perfect equilibria depending on the value of set-up cost. Both firms, or one firm, or no firm adopt new technology. On the other hand, under relative profit maximization there are two sub-game perfect equilibria. Both firms, or no firm adopt new technology. And we show that if demand is sufficiently high, it is more probable that both firms adopt new technology under relative profit maximization than that both firms, or one firm adopt new technology under absolute profit maximization.
    Keywords: duopoly, relative profit maximization, adoption of new technology
    JEL: D43 L13
    Date: 2014–09–04
  3. By: Irvine, Paul; Park, Shawn Saeyeul; Yildizhan, Celim
    Abstract: Using a recently expanded data set on supplier-customer links, we examine how customer concentration affects firm profitability. We find that the relation between customer concentration and firm profitability is more complex than recent literature suggests. We confirm that customer concentration promotes operating efficiencies for profitable firms. However, we �find a different result for younger, less profitable �firms where customer concentration impairs firm profitability and can increase distress risk. We explain these differences by introducing a relationship life-cycle hypothesis wherein the relation between customer-base concentration and profitability is time-varying; being significantly negative in the early years of the relationship, and turning positive as the relationship matures. The key driver of this dynamic is the customer-specific investments the relationship entails. These investments result in larger �fixed costs and greater operating leverage early in the relationship, but can significantly benefit the firm as the relationship matures.
    Keywords: Customer concentration, customer-specific investment, selling, general and administrative expense, profitability, default risk, Celim Yildizhan, Paul Irvine, Shawn Saeyeul Park
    JEL: G31 G33 L25 M41
    Date: 2013–10–10
  4. By: Beck, Thorsten (BOFIT); Degryse, Hans (BOFIT); De Haas, Ralph (BOFIT); van Horen , Neeltje (BOFIT)
    Abstract: Using a novel way to identify relationship and transaction banks, we study how banks’ lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.
    Keywords: relationship banking; credit constraints; business cycle
    JEL: F36 G21 L26 O12 O16
    Date: 2014–07–07
  5. By: Ralitza Nikolaeva
    Abstract: A new market poses many questions for potential entrants. Among the most pertinent ones are which factors contribute to firm’s survival. But whether the same factor is equally beneficial at the time of entry and at a later stage has been rarely addressed. Consequently, we explore the dynamism of firm-controlled survival determinants and their correspondence to sales drivers. Our contributions are twofold – exploring the time-varying effect of survival determinants and comparing them to sales determinants after a shakeout in the market. We demonstrate the dangers of generalizing about success factors without considering their dynamic nature or the firm’s strategic objectives.
    Keywords: dynamic effects, e-retailing, survivor bias
    JEL: M13
    Date: 2014–10–30
  6. By: Zhiyang Liu (Shanghai University of Finance and Economics); Zhiqi Chen (Department of Economics, Carleton University)
    Abstract: We investigate the relationship between venture capital (VC) networks and investment performance in China. Distinct features of China’s VC networks are captured in our econometric model through the inclusion of an index of network stability and a dummy variable that indicates a VC firm’s connections with the Chinese state. Our econometric analysis shows that a VC firm’s position in its network, its network stability and close connections with the state all contribute to its investment performance. Comparison with the findings in Hochberg et al. (2007) indicates that networks are more important for investment performance in China than in the US. Moreover, our analysis suggests that familiarity with local culture and customs and understanding of the idiosyncrasies of China’s markets and institutions are important for the success of a VC firm in China.
    Keywords: Venture capital; Networks; Investment performance; China
  7. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Javier Changoluisa (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze the effect of new business formation on the productivity of incumbent manufacturing establishments. We obtain robust empirical evidence of productivity improvements that are due to the emergence of new businesses in the same industry, that is, on the output market. This effect is spatially limited to the respective region. Regional competition from new businesses on the input market and cross-industry effects are not related to incumbents' productivity changes. The effect that new competition has on incumbents is moderated by an incumbent's distance from the technological frontier; incumbents close to the frontier exhibit a more pronounced positive reaction.
    Keywords: New business formation, productivity, incumbent firms
    JEL: L26 D20 O12
    Date: 2014–10–27
  8. By: Lim, Seonyoung; Choi, Kangsik
    Abstract: We investigate government subsidy policies in which a home firm and a foreign firm choose to strategically set prices or quantities in a third market. We show that even though each firm can earn higher profits under Cournot competition than under Bertrand competition regardless of the nature of goods, choosing Bertrand competition is the dominant strategy for both firms. This leads each firm to face a prisoners' dilemma in equilibrium. We also show that from the aspects of governments under subsidy regime, Cournot competition is more efficient than Bertrand competition when the goods are substitutes, and vice versa when the goods are complements. For this, from the aspects of firms, the Cournot equilibrium could be Pareto superior (inferior) with government's intervention of subsidy policy when the goods are substitutes (complements). Thus, the conflict of interests between governments and firms occur when goods are complements. Hence, our result may justify that when the goods are substitutes, a general principle is that the incentive to intervene in the international trade is greater under Cournot competition than under Bertrand competition.
    Keywords: Subsidy, Cournot, Bertrand, Social Welfare, Prisoners' Dilemma.
    JEL: F12 F13 L13
    Date: 2014–10–24
  9. By: Ulf Lewrick; Lukas Mohler; Rolf Weder
    Abstract: This paper presents a framework to assess the relative importance of three key sources of productivity growth that research on international trade focuses on: (i) inter-industry specialisation; (ii) intra-industry reallocation of resources across heterogeneous firms, including firm entry and exit; and (iii) technological progress. Detailed data on Swiss manufacturing firms illustrate how the framework can be empirically applied. Based on this example, we find that intra-industry reallocations are the most important source of growth in aggregate total factor productivity, reflecting in particular the productivity growth of large, incumbent firms and the entry of new firms. That said, inter-industry specialisation and general technological progress remain important supplementary sources of growth in Swiss manufacturing.
    Keywords: Growth, total factor productivity, inter-industry trade, intra-industry trade
    Date: 2014–10
  10. By: Huu Thanh Tam Nguyen (University of Evry Val d’Essonne, EPEE & Economics Department); Ngoc-Sang Pham (CES, University Paris I Pantheon-Sorbonne)
    Abstract: We consider a small open economy with two productive sectors (an old and a new). There are two types of firms in the new industry: a well planted multinational firm and a potential domestic firm. Our framework highlights a number of results. First, in a poor country with low return of training and weak FDI spillovers, the domestic firm does not exist in the new industry requiring a high fixed cost. Second, once the host economy has the capacity to create the new firm, the productivity of the domestic firm is the key factor allowing it to enter into the new industry, and even eliminate the multinational firm. Interestingly, in some cases where FDI spillovers are strong, the country should invest in the new industry, but not train specific workers. Last, credit constraints and labor/capital shares play important roles in the competition between the multinational firm and the domestic one.
    Keywords: FDI spillovers, investment in training, heterogeneous firms, entry cost
    JEL: F23 F4 O3
    Date: 2014
  11. By: Jin, Xin
    Abstract: This article studies the consequences of firm delayering on wages and the wage distribution inside firms. I consider a job-assignment model with asymmetric information and a slot constraint. The model predicts that more efficient firms are not necessarily larger than less efficient firms if firms are allowed to adjust their internal organizational structure through delayering. After delayering, wages at all levels increase and the wage distribution becomes more unequal. These predictions match a set of empirical findings in recent studies that are not well explained by existing theories.
    Keywords: delayer, asymmetric information, promotion, slot constraint
    JEL: J31 M51
    Date: 2014
  12. By: Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno
    Abstract: We study entry in a growing market by ex-ante symmetric duopolists when sunk costs differ for the innovating and imitating firm. Strategic competition takes the form either of a preemption race or of a war of attrition, the latter being likelier when demand uncertainty is high. Industry value is maximized when firms seek neither to race nor to delay investment. Free imitation is socially costly, and if the consumer surplus resulting from imitation is not too large the socially optimal imitation cost, as may be induced by patent protection, involves preemption. Finally, we discuss endogenous entry barriers and contractual alternatives that increase the likelihood of preemption regimes, with differing implications for imitator entry. When the cost of imitation is low for instance, innovators are shown to rely more heavily on trade secrecy and patents. Welfare-enhancing takeovers and licensing are also shown to occur.
    Keywords: Dynamic oligopoly; Knowledge spillover; Real options
    JEL: G31 L13 O33
    Date: 2014

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