nep-bec New Economics Papers
on Business Economics
Issue of 2014‒12‒24
fifteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Enterprise-level bargaining and labour productivity of Italian family firms: a quantile regression analysis By Damiani, Mirella; Pompei, Fabrizio; Ricci, Andrea
  2. Hiring New Ideas: International Migration and Firm Innovation in New Zealand By Keith McLeod; Richard Fabling; David C. Maré
  3. Managing the Family Firm: Evidence from CEOs at Work By Oriana Bandiera; Andrea Prat; Raffaella Sadun
  4. The Division of Labor within Firms, Optimal Entry, and Firm Productivity By Koji Shintaku
  5. Employment Cyclicality and Firm Quality By Kahn, Lisa B.; McEntarfer, Erika
  6. Public regulatory intervention in consumer-friendly firms By Vitor Miguel Ribeiro
  7. Heterogeneity, Selection and Labor Market Disparities By Bonfiglioli, Alessandra; Gancia, Gino A
  8. Welfare Analysis of Dynamic Voluntary Advertising in Covered Markets By Tenryu, Yohei; Kamei, Keita
  9. Energy Use Patterns and Firm Performance: Evidence from Indian Industries By Santosh Kumar Sahu
  10. Endogenous cartel formation: Experimental evidence By Fonseca, Miguel A.; Normann, Hans-Theo
  11. What types of firms tend to be more innovative: A study on Germany By Stephan Brunow; Valentina Nafts
  12. Long-term regulatory orientation and the ideal timing of quality investment By Vitor Miguel Ribeiro
  13. Market potential, start-up size and the survival of new firms By Klaesson, Johan; Klaesson, Charlie
  14. Determinants of success and failure in the internationalisation of the cork business: A tale of two Iberian family firms By João Lopes; Amélia Branco; Francisco Parejo; Jose Rangel
  15. New firm formation and its effect on employment growth in declining regions By Heike Delfmann; Sierdjan Koster

  1. By: Damiani, Mirella; Pompei, Fabrizio; Ricci, Andrea
    Abstract: We investigate the role of Italian firms to evaluate their role on labour productivity performance. We find that family owned firms are less efficient than their no-family counterparts and also that family management negatively affects labour productivity. Furthermore, we estimate the role of firm level bargaining to verify whether family controlled firms, adopting these types of agreements, may partially close their efficiency gap with respect to their competitors. We find that enterprises under family governance obtain significant efficiency gains when they adopt firm level bargaining, greater than those obtained by their no-family counterparts.
    Keywords: Family firms, corporate governance, labour productivity
    JEL: G3 G32 J3 J33
    Date: 2014–12–05
  2. By: Keith McLeod (Ministry of Business, Innovation and Employment); Richard Fabling (Motu Economic and Public Policy Research); David C. Maré (Motu Economic and Public Policy Research)
    Abstract: Poor productivity performance has been identified as a significant issue for New Zealand, and innovation is seen as a key mechanism for improving productivity growth. Understanding the drivers of firm innovation therefore represents an important step towards improving New Zealand’s economic performance. In this paper, we combine firm-level innovation data with worker characteristics to examine links between innovation and the presence of new arrivals – both immigrants and returning New Zealanders – in the firm’s workforce. Across a range of measures we find positive relationships between firm-level innovation and the share of new arrivals. These relationships weaken once we account for variation in firm characteristics (firm size, industry, R&D expenditure) and other worker characteristics (including the share of new and/or high skilled workers). Within new arrivals, innovation outcomes are most strongly associated with high skilled workers, though magnitudes vary depending on whether workers are returning New Zealanders or immigrants. Firms with a higher share of high skilled recent migrants were more likely to report introducing new marketing methods, new goods and services, or goods and services new to New Zealand. Firms with a higher share of high skilled returning New Zealanders were more likely to report introducing new organisational and managerial practices, and (as with migrants) goods and services new to New Zealand.
    Keywords: Innovation, workforce composition, immigrants, returning New Zealanders
    JEL: O31 J24 J61
    Date: 2014–11
  3. By: Oriana Bandiera; Andrea Prat; Raffaella Sadun
    Abstract: CEOs affect the performance of the firms they manage, and family CEOs seem to weaken it. Yet little is known about what top executives actually do, and whether it differs by firm ownership. We study CEOs in the Indian manufacturing sector, where family ownership is widespread and the productivity dispersion across firms is substantial. Time use analysis of 356 CEOs of listed firms yields three sets of findings. First, there is substantial variation in the number of hours CEOs devote to work activities, and longer working hours are associated with higher firm productivity, growth, profitability and CEO pay. Second, family CEOs record 8% fewer working hours relative to professional CEOs. The difference in hours worked is more pronounced in low competition environments and does not seem to be explained by measurement error. Third, difference in diffrences estimates with respect to the cost of effort, due to weather shocks and popular sport events, reveal that the observed difference between family and professional CEOs is consistent with heterogeneous preferences for work versus leisure. Evidence from six other countries reveals similar findings in economies at different stages of development.
    Date: 2013–12
  4. By: Koji Shintaku
    Abstract: Constructing an intra-industry trade model with division of labor within firms, this paper shows that opening up to trade improves firm productivity. Firms choose the number of markets they export. Optimal entry conditions for export markets rule out loss from opening up to trade. Under fixed export costs, opening up to trade makes some firms exit and concentrates labor to surviving firms through recruiting process and induces the division of labor. An increase in the number of markets induces firms to enter more export markets and improves firm productivity in the long run and has the reverse effect on firm productivity in the short run.
    Keywords: the division of labor within firms; firm productivity; the optimal number of markets firms enter; fixed export costs
    JEL: F12
    Date: 2014–12
  5. By: Kahn, Lisa B. (Yale University); McEntarfer, Erika (U.S. Census Bureau)
    Abstract: Who fares worse in an economic downturn, low- or high-paying firms? Different answers to this question imply very different consequences for the costs of recessions. Using U.S. employer-employee data, we find that employment growth at low-paying firms is less cyclically sensitive. High-paying firms grow more quickly in booms and shrink more quickly in busts. We show that while during recessions separations fall in both high-paying and low-paying firms, the decline is stronger among low-paying firms. This is particularly true for separations that are likely voluntary. Our findings thus suggest that downturns hinder upward progression of workers toward higher paying firms – the job ladder partially collapses. Workers at the lowest paying firms are 20% less likely to advance in firm quality (as measured by average pay in a firm) in a bust compared to a boom. Furthermore, workers that join firms in busts compared to booms will on average advance only half as far up the job ladder within the first year, due to both an increased likelihood of matching to a lower paying firm and a reduced probability of moving up once matched. Thus our findings can account for some of the lasting negative impacts on workers forced to search for a job in a downturn, such as displaced workers and recent college graduates.
    Keywords: firm quality, wages, recessions
    JEL: E24 E32 J23 J3 J63
    Date: 2014–11
  6. By: Vitor Miguel Ribeiro (Vitor Miguel Ribeiro - FEP - Vitor Miguel de Sousa Ribeiro)
    Abstract: We study a duopoly with differentiated and substitutable goods composed of one consumer-friendly firm and one pure-profit maximizing firm. In such a duopoly, a regulatory authority intervenes to control the degree of altruism of the consumer-friendly firm. We conclude that under quantity competition, if firms sell goods that are too homogeneous the policymaker should impose a ceiling on the level of benevolence of the consumer-friendly firm. However, under price competition, the policymaker never imposes a ceiling on the level of kindness of the consumer-friendly firm. Our results also show that, whatever the degree of product differentiation, the social welfare under price competition is always higher than the social welfare under quantity competition, which restores the arguments pointed out by the traditional literature and constitutes a sharp contrast with Nakamura (2013).
    Keywords: Consumer-Friendly Firm, Product Differentiation, Public Intervention
    JEL: D43 L11 L13 R12
    Date: 2014–11
  7. By: Bonfiglioli, Alessandra; Gancia, Gino A
    Abstract: We study the incentives to improve ability in a model where heterogeneous firms and workers interact in a labor market characterized by matching frictions and costly screening. When effort in improving ability raises both the mean and the variance of the resulting ability distribution, multiple equilibria may arise. In the high-effort equilibrium, heterogeneity in ability is sufficiently large to induce firms to select the best workers, thereby confirming the belief that effort is important for finding good jobs. In the low-effort equilibrium, ability is not sufficiently dispersed to justify screening, thereby confirming the belief that effort is not so important. The model has implications for wage inequality, the distribution of firm characteristics, sorting patterns between firms and workers, and unemployment rates that can help explaining observed cross-country variation in socio-economic and labor market outcomes.
    Keywords: Beliefs; Effort; Firm Heterogeneity; Multiple Equilibria; Selection; Sorting; Unemployment; Wage Inequality
    JEL: E24 J24 J64
    Date: 2014–05
  8. By: Tenryu, Yohei; Kamei, Keita
    Abstract: In this study, we analyze a dynamic duopoly game in which firms can use advertising and price as competitive tools. The market is assumed to be completely covered in the sense that all consumers purchase a product from one of the two firms. We assume that advertising creates a positive externality. Thus, each firm voluntarily advertises to persuade consumers to buy its products over those of the other firm, even though the firms compete with one another in price. Two cases are considered: an interior case and a corner case. In this situation, we investigate how changes in consumer preference and firm technology level affect advertising, profits, and economic welfare and highlight the differences between the two cases.
    Keywords: Advertising, vertical product differentiation, differential games, duopoly.
    JEL: C72 L13 M37
    Date: 2014–12
  9. By: Santosh Kumar Sahu (Madras School of Economics)
    Abstract: This paper is an attempt to understand the relationship between firm performances based on energy use patterns of Indian manufacturing industries. Determinates of firm performances are estimated for the full sample and for the sample of firms using similar energy sources. Econometric analysis of the data collected from the CMIE PROWESS at firm level from 2005-2013 reveals that the determinants of profitability vary across groups. Energy intensity is positively related to profitability for three models except for the firms using natural gas as primary source of energy. R and D intensity is positively related to profitability for the full sample and for the firms using petroleum. For the firms using coal as primary source of energy, less R and D intensive firms are found to be profitable. For all the cases, firm size is found to be nonlinearly related to profitability. In the policy front, shifting primary energy source from coal and petroleum to natural gas; firms can become energy efficient and profitable.
    Keywords: Energy Use, Firm Performance, Indian Manufacturing, Energy Intensity, Profitability
    JEL: Q4 B23
    Date: 2014–09
  10. By: Fonseca, Miguel A.; Normann, Hans-Theo
    Abstract: In a Bertrand-oligopoly experiment, firms choose whether or not to engage in cartel-like communication and, if so, they may get fined by a cartel authority. We find that four-firm industries form cartels more often than duopolies because they gain less from a hysteresis effect after cartel disruption.
    Keywords: cartels,collusion,communication,experiments,repeated games
    JEL: C7 C9 L41
    Date: 2014
  11. By: Stephan Brunow; Valentina Nafts
    Abstract: Innovation is a key driver of technological progress and growth in a knowledge-based economy. There are various motives for individual firms to innovate: improving quality secures market leadership, introducing new products leads the firm into new markets, adopting new technologies could be seen as a catch-up strategy within an industry or an improvement of the firm's own products when the technology adopted is based on ideas from other industries. Firms can perform innovation activities in one or more of these areas or in none of them. We therefore raise the question of what types of firms tend to be more innovative, i.e. which firms innovate in more of these areas. For this purpose we employ firm-level survey data and combine it with administrative data from Germany's social security system. An ordered logit model is estimated using a variety of characteristics which describe the workforce employed and other firm-related variables, the regional environment where the firm is located, as well as industry and region fixed effects.
    Keywords: firm innovation; labor diversity; ordered logit; regional economic environment
    JEL: J O R
    Date: 2014–11
  12. By: Vitor Miguel Ribeiro (Vitor Miguel Ribeiro - FEP - Vitor Miguel de Sousa Ribeiro)
    Abstract: This paper builds on a duopoly with horizontally differentiated firms, where firms simultaneously decide the long-term plan (location) in addition to the short-term issue (price). As in Bárcena-Ruiz and Casado-Izaga (2014), we introduce a third entity in the city by considering the presence of a policymaker that targets the long-run ideology (location) of the regulated sector. While Bárcena-Ruiz and Casado-Izaga (2014) relies on a non-discriminatory setting relatively to firms' quality, here we introduce quality distortion (a high-quality firm versus a low-quality firm). Our aim is to study the relationship between the long-term regulatory guidance provided by a policymaker and the ideal timing of the quality investment conducted by the high-quality firm. We find that it is irrelevant to the firm invest before or after the long-term decision of the policymaker. In this sense, we show that the long-term strategic guideline conducted by a regulatory authority is not the motivating source of firms' improvement-quality investments. Finally, we conclude that the presence of an asymmetric quality environment between firms leads to a movement to the right on firms' location, creates an ambiguous (an enhancing) effect on the equilibrium profit of the low-quality (high-quality) firm and generates a reduction of the equilibrium consumer surplus and equilibrium social welfare as well, relatively to a situation where no quality discrimination exists.
    Keywords: Spatial competition, Long-run decision, Policymaker location, Quality asymmetry, Price competition.
    JEL: D43 L13 L50 R12
    Date: 2014–12
  13. By: Klaesson, Johan (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS)); Klaesson, Charlie (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: Abstract: Many phenomena in the economy are influenced by geography. The size of new firm start-ups vary in many dimensions, among them industry and geography. The purpose of this paper is to explore the determinants of the geographical distribution of the size of new firms. Re¬gional size itself can be expected to influence the size of the new firm. Given that there are fixed costs present in the new firms small and low-density regions will demand a larger size of the new firm. The reason for this is that in small regions the firm may not be able to find customers nearby, but need to sell its produce over some distance. This means that the firm must house capacities to do so and this increases the fixed cost component and hence forces the firm to produce a larger amount of the output. Another possible reason can be found in the availability of producer services. In small regions, the number of producer services is more limited and, hence, force the firms to produce some of these services in-house. Gener¬ally, the overall diversity found in small regions is smaller compared to large re-gions. This means that the variation in goods and services available in the market will be smaller, once again forcing the new firm to do more things within the firm. In addition, it is ex¬pected that there is a relationship between entry rate and the size of the entrants.
    Keywords: Entry; Start-up size; Market Potential; Region; Industry; Sweden
    JEL: C21 L11 M13 R11 R12
    Date: 2014–11–26
  14. By: João Lopes; Amélia Branco; Francisco Parejo; Jose Rangel
    Abstract: The trajectories of internationalisation followed by family firms can be viewed from several theoretical approaches ? phases of the internationalisation process; international entrepreneurship, sociological perspective, family business theory. An historical perspective of the internationalised family firms, allowing the integration of these several approaches, is useful to a deep understanding of the internationalisation process of different sectors and countries. The main purpose of this paper is to identify the facilitating and the restricting factors during the internationalisation path of family firms, considering their competitive advantages, the ownership structure and management attitudes, innovation and intangible assets and other relevant factors, internal and/or external to the firm. It makes a long run analysis (more than one century) of two companies acting in the cork business in Spain and Portugal: Mundet and Amorim&Irmãos. One of these companies - Mundet ? has been closed in the 1980s and the other - Amorim&Irmãos ? became, and is by now, the leading company in the cork worldwide business. The careful comparison of these two stories, one of failure and the other of success, allows an accurate identification of the determinants of a successful internationalisation. In fact, it is useful for understanding several characteristics of both firms, some similar and other different, allowing the test of several hypothesis in the context of the theoretical approach to the internationalisation of family firms. First of all, both are family firms operating in the same business and since their origin orientated to foreign markets. Second, their story went along much of the twentieth century and so both faced similar national and international constraints but in the end both became leading firms in the cork business, although in different time periods. Third, their location choices were different and, although in both cases benefiting from agglomeration forces in certain phases of the business, they were also important determinants of the opposite destinies of these two emblematic Iberian cork family firms.
    JEL: F23 L73 N60 O14 R12
    Date: 2014–11
  15. By: Heike Delfmann; Sierdjan Koster
    Abstract: New firm formation is often highly prioritized by local governments, particularly for regions that are declining. Entrepreneurship can play an important role in keeping declining regions vital through job creation. Yet, the way in which new firm formation exerts its influence on employment growth is not yet evident. Are start-ups in those areas equally productive in influencing employment change as they are in growing regions? Although there is a large and growing body of research on new firm formation and employment, there is still a knowledge gap concerning the impact of the context on the effect of new firm formation. Previously the focus has been on growth. New firm formation can contribute direct and indirectly to regional employment. The indirect effects are thought to have a larger impact on the long term, and indirect effects are not per sé positively related to employment growth. Focusing on the regional context, we investigate whether the relationship differs depending decline or growth, and by the degree of urbanization, to determine both long and short term employment effects. In order to establish the impact of new firm formation on employment rates, the paper examines panel data of firm dynamics and employment growth retrieved from the LISA database covering the whole of the Netherlands on a municipality level (418 regions) between 1996-2010. This data is complemented with data on population density, size, growth and decline from the Statistic Netherlands.
    Keywords: Employment growth; population decline; new firm formation; urban and rural regions; direct and indirect effects;
    JEL: M13 R11 O18
    Date: 2014–11

This nep-bec issue is ©2014 by Vasileios Bougioukos. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.