nep-bec New Economics Papers
on Business Economics
Issue of 2014‒12‒29
fifteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. International Trade and Firm-level Markups when Location and Quality Matter By Flora Bellone; Patrick Musso; Lionel Nesta; Frederic Warzynski
  2. Optimal Leniency Programs when Firms Have Cumulative and Asymmetric Evidence By Blatter, Marc; Emons, Winand; Sticher, Silvio
  3. When Arm’s Length Is Too Far. Relationship Banking over the Business Cycle By Beck, Thorsten; de Haas, Ralph; Degryse, Hans; Van Horen, Neeltje
  4. Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance By Flabbi, Luca; Macis, Mario; Moro, Andrea; Schivardi, Fabiano
  5. Agglomeration economies and global activities: impact on firm survival By Anna Maria Ferragina; Fernanda Mazzotta
  6. Exporting and Firm Performance: Evidence from a Randomized Trial By David Atkin; Amit K. Khandelwal; Adam Osman
  7. Self-Regulation and Regulatory Flexibility: Why Firms May be Reluctant to Signal Green By Thomas P. Lyon; John W. Maxwell
  8. Importers, Exporters and Multinationals: Exploring the Hierarchy of International Linkages By Gullstrand, Joakim; Olofsdotter, Karin; Thede, Susanna
  9. Deregulation and productivity: selection or within-firm effect? By Oleksandr Shepotylo
  10. The Impact of Skilled Foreign Workers on Firms: an Investigation of Publicly Traded U.S. Firms By Anirban Ghosh; Anna Maria Mayda; Francesc Ortega
  11. The Economic Impact of Professional Services Liberalisation By Erik Canton; Daria Ciriaci; Irune Solera
  12. Birthplace diversity and productivity spill-overs in firms By René Böheim; Thomas Horvath; Karin Mayr
  13. Mapping Information Economy Businesses with Big Data: Findings for the UK By Max Nathan; Anna Rosso
  14. INTERNAL CALCULATION IN TERM BUSINESS DECISION MAKING By Jugoslav Aničić, Miloje Jelić, Jasmina M. Đurović, Srećko Radoičić, Živojin B. Prokopović
  15. What Drives Business Cycle Fluctuations: Aggregate or Idiosyncratic Uncertainty Shocks? By Bijapur, Mohan

  1. By: Flora Bellone (University of Nice Sophia Antipolis; GREDEG CNRS); Patrick Musso (University of Nice Sophia Antipolis; GREDEG CNRS); Lionel Nesta (OFCE Sciences Po.); Frederic Warzynski (Aarhus University)
    Abstract: In this paper, we estimate firm-level markups and test some micro-level predictions of a model of international trade with heterogenous firms and endogenous mark-ups. Our theoretical framework is an extended version of the Melitz and Ottaviano (2008) (MO) model which features both quality and spatial differentiation across firms. In line with our model, we find that firm markups are positively related to firm productivity and negatively related to the toughness of local competition. Considering the relationship between firm markups and exports, we find evidence that the quality enhancing channel overbalances the price depressing channel of global competition.
    Keywords: Markups, Productivity, Exports, Firm-level data, France
    JEL: F12 L1
    Date: 2014–11
  2. By: Blatter, Marc; Emons, Winand; Sticher, Silvio
    Abstract: An antitrust authority deters collusion using fines and a leniency program. Unlike in most of the earlier literature, our firms have imperfect cumulative evidence of the collusion. That is, cartel conviction is not automatic if one firm reports: reporting makes conviction only more likely, the more so, the more firms report. Furthermore, the evidence is distributed asymmetrically among firms. Asymmetry of the evidence can increase the cost of deterrence if the high-evidence firm chooses to remain silent. Minimum-evidence standards may counteract this effect. Under a marker system only one firm reports; this may increase the cost of deterrence.
    Keywords: antitrust; cartels; deterrence; evidence; leniency
    JEL: D43 K21 K42 L40
    Date: 2014–08
  3. By: Beck, Thorsten; de Haas, Ralph; Degryse, Hans; Van Horen, Neeltje
    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: business cycle; credit constraints; relationship banking
    JEL: F36 G21 L26 O12 O16
    Date: 2014–06
  4. By: Flabbi, Luca; Macis, Mario; Moro, Andrea; Schivardi, Fabiano
    Abstract: We analyze a matched employer-employee panel data set and find that female leadership has a positive effect on female wages at the top of the distribution, and a negative one at the bottom. Moreover, performance in firms with female leadership increases with the share of female workers. This evidence is consistent with a model where female executives are better equipped at interpreting signals of productivity from female workers. This suggests substantial costs of under-representation of women at the top: for example, if women became CEOs of firms with at least 20% female employment, sales per worker would increase 6.7%.
    Keywords: executives’ gender; firm performance; gender gap; glass ceiling; statistical discrimination
    JEL: J16 J7 M12 M5
    Date: 2014–11
  5. By: Anna Maria Ferragina; Fernanda Mazzotta
    Abstract: The focus of our contribution is to shed light on the importance of firm agglomerations and FDI as drivers of firm survival in Italy. We focus upon different types of agglomeration economies related to the geographical context checking how these economies impact differently on heterogeneous firms survival and whether effects are robust to different estimators (Probit, Cox hazard models, Probit Heckman) and to different assumptions about inter-and intra-regional spillovers. The novelty our paper with respect to previous studies is twofold. First of all, we focus both on external economies and on firm internationalization, two crucial determinants of firm productivity and competitiveness and ultimately of firm survival. Hence, we consider the intertwined role of firm global activities with respect to the local drivers of firm dynamics by comparing foreign investors in Italy and Italian firms' investing abroad to domestic firms to catch a crucial source of heterogeneity of firm behavior with respect to external economies (correcting for the endogeneity of the FDI variables and for sample selection). Secondly, we use a very large dataset at firm level which takes into account several different dimensions at firm, industry and province level (previous studies are mostly at sectoral or at province/regional level) for more than 500,000 observations concerning Italian manufacturing corporate firms disaggregated by sector and by 103 provinces over a long span of time (2002-2010) which allows to also catch the effect of the crisis. With respect to agglomeration economies the paper analyses whether and how firms' exit choices are influenced by five different agglomeration indicators related to the geographical context: 1) External economies arising from localization economies due to the spatial concentration of firms in the same industry (GLAESER et al., 1992) and to 2) local production systems (Industrial districts); 3) External economies available to all local firms irrespective of sector and arising from urban size and density (urbanization economies); 4) External economies available to all local firms stemming from specialisation of firms in different varieties which may favour intra- and inter industry knowledge spillovers via Jacobs externalities (JACOBS, 1969); 5) diversification due to unrelated variety to capture the portfolio effect arising from the spatial concentration of firms belonging to different and non-complementary industries which may protect the region from sector-specific shocks (FRENKEN et al., 2007). We check whether the relevance of these agglomeration economies differ substantially between Italian firms and firm which invest in active or passive FDI. We get evidence on three issues: 1) Benefits from geographically and industry bounded specialisation for survival; 2) Industrial districts economies impact on firm survival 3) Diversification economies relevance.
    JEL: C41 F21 F23 L25
    Date: 2014–11
  6. By: David Atkin; Amit K. Khandelwal; Adam Osman
    Abstract: We conduct a randomized control trial that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after accounting for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs, treatment firms receive higher quality assessments despite no difference in production time. Third, treatment firms exhibit learning curves over time. Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.
    JEL: F10
    Date: 2014–11
  7. By: Thomas P. Lyon (Ross School of Business, University of Michigan); John W. Maxwell (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: Corporate self-regulation is a crucial non-market strategy, and has generally been understood as a response to regulatory threats. However, self-regulation can also influence the nature of regulatory threats, especially when firms have private information about their costs of abatement. We study a setting where regulation can potentially be preempted, providing a public good for the whole industry, but where regulators have flexibility in how they enforce regulatory policies, which can provide benefits to particular firms. Strategic management must balance these concerns. We show that firm self-regulatory actions may alter both the form and likelihood of regulation. As a result, firm decisions shape rather than simply respond to the regulatory threat. We characterize when firms are willing to signal their type through substantial self-regulation, and when they prefer to stay in step with the rest of the industry through modest levels of self-regulation.
    Keywords: Self-Regulation, Regulatory Flexibility, Asymmetric Information, Private Governance
    JEL: D83 L31 M14 Q56
    Date: 2014–09
  8. By: Gullstrand, Joakim (Department of Economics, Lund University); Olofsdotter, Karin (Department of Economics, Lund University); Thede, Susanna (Institute for European Studies, University of Malta)
    Abstract: The purpose of this paper is to empirically explore two dimensions of the firm hierarchy of international market-specific linkages using data for Swedish manufacturing firms over the 1997 to 2007 period. First, we investigate the productivity ordering with respect to importing, exporting and investing abroad. Second, we investigate the productivity ordering with respect to linkage complexity (i.e. the number of linkages at firm level). Our findings support a general productivity hierarchy from importing to exporting and then investing abroad as well as from low- to high-linkage complexity. However, an industry-by-industry examination shows that the hierarchical structure is only generally upheld for linkage complexity while the ordering of the three linkages does not exhibit the same regularity across industries. In extending the analysis, we find these irregularities to be upheld by industry characteristics. Lastly, we go beyond the productivity ordering and explore firm characteristics correlated with the linkage complexity.
    Keywords: manufacturing firms; productivity ordering; market linkages
    JEL: F14 F21 F23
    Date: 2014–12–05
  9. By: Oleksandr Shepotylo
    Abstract: In the literature, trade liberalization increases industry productivity through two channels. First, firms increase productivity due to better and wider choice of inputs. In addition, at least theoretically, the mechanism of selection eliminates the least productive firms from the industry. To disentangle the sources of industry productivity increase, we apply the recently developed quantile approach (Combes et al., 2012) to the episode of trade and services liberalization in Ukraine. We modify the methodology in order to study changes in productivity distribution within an industry over time. We start with the Melitz model of an industry with heterogeneous firms. Unlike in the original model, we allow for productivity distribution to change over time as a result of deregulation. By looking at changes in productivity distribution of manufacturing and services firms in Ukraine in 2001-2009, we estimate the left-truncation, dilation, and shift in distribution for each NACE 2 digit sector. We compare relative importance of the within firm channel of productivity increase vis-à-vis the selection channel. We further relate the estimates of the left-truncation, dilation, and shift to industry measures of trade and services liberalization that include input tariffs liberalization and input services liberalization.
    Keywords: selection; productivity; distribution; quantile method
    Date: 2014–11
  10. By: Anirban Ghosh (Georgetown University); Anna Maria Mayda (Georgetown University); Francesc Ortega (Queens College, CUNY)
    Abstract: Many U.S. businessmen are vocally in favor of an increase in the number of H-1B visas. Is there systematic evidence that this would positively affect firms' productivity, sales, employment or profits? To address these questions we assemble a unique dataset that matches all labor condition applications (LCAs) - the first step towards H-1B visas for skilled foreign-born workers in the U.S. - with firm-level data on publicly traded U.S. firms (from Compustat). Our identification is based on the sharp reduction in the annual H-1B cap that took place in 2004, combined with information on the degree of dependency on H-1B visas at the firm level as in Kerr and Lincoln (2010). The main result of this paper is that if the cap on H-1B visas were relaxed, a subset of firms would experience gains in average labor productivity, firm size, and profits. These are firms that conduct R&D and are heavy users of H-1B workers - they belong to the top quintile among filers of LCAs. These empirical findings are consistent with a heterogeneous- firms model where innovation enhances productivity and is subject to fixed costs.
    Date: 2014–11
  11. By: Erik Canton; Daria Ciriaci; Irune Solera
    Abstract: Competition in professional services is, in some occasions, hindered by excessive regulation. This may constrain business dynamics (entry and exit of firms) and create inefficiencies and excessive rents. To improve market performance in those professional services generally regulated, several EU countries have reduced regulatory restrictions regarding the entry into and exercise of these professions. This study is an attempt to evaluate the effects of regulatory barriers in four of them, i.e. legal, accounting, architectural and engineering activities in the EU over the period 2008-2011. It is found that less strict regulation improves their allocative efficiency and reduces the observed larger-than-average profitability, through intensified business dynamics.
    JEL: D21 D22
    Date: 2014–09
  12. By: René Böheim; Thomas Horvath; Karin Mayr
    Abstract: We determine workforce composition and wages in firms in the presence of productivity spill-overs between co-workers. In equilibrium, workers' wages depend on the production struc- ture of firms, own group size, and aggregate workforce composition in the firm. We estimate the wage effects of workforce diversity and own group size by birthplace and the implied pro- duction structure in Austrian firms using a comprehensive matched employer-employee data set. In our data, we identify a positive effect of workforce diversity and a negative effect of own group size on wages, which suggest that workers of different birthplaces are complements in production on average.
    JEL: D21 D22 F22 J31
    Date: 2014–08
  13. By: Max Nathan; Anna Rosso
    Abstract: Governments around the world want to develop their ICT and digital industries. Policymakers thus need a clear sense of the size and characteristics of digital businesses, but this is hard to do with conventional datasets and industry codes. This paper uses innovative 'big data' resources to perform an alternative analysis at company level, focusing on ICT-producing firms in the UK (which the UK government refers to as the 'information economy'). Exploiting a combination of public, observed and modelled variables, we develop a novel 'sector-product' approach and use text mining to provide further detail on the activities of key sector-product cells. On our preferred estimates, we find that counts of information economy firms are 42% larger than SIC-based estimates, with at least 70,000 more companies. We also find ICT employment shares over double the conventional estimates, although this result is more speculative. Our findings are robust to various scope, selection and sample construction challenges. We use our experiences to reflect on the broader pros and cons of frontier data use.
    Keywords: Quantitative methods, firm-level analysis, Big Data, text mining, ICTs, digital economy, industrial policy
    JEL: C81 L63 L86 O38
    Date: 2014–12
  14. By: Jugoslav Aničić, Miloje Jelić, Jasmina M. Đurović, Srećko Radoičić, Živojin B. Prokopović (University Union Nikola Tesla, Faculty of Construction Management)
    Abstract: Business-financial decision making represent prime activity of top management. Growing complexity in the business ,market and rapid technological change require fast and appropriate answer of top management. Confident and efficient system of internal calculation gives confident base, for making financial decision and strategic as well. Companies of industrial sector in Serbia can significantly improve their business performance by improving internal calculation systems. The preservation and strengthening market position of a company can only be achieved by continuous cost control, based on reliable accounting, and adequate system of internal calculation.
    Keywords: internal calculation, business decisions, management, competitiveness
    JEL: M41
    Date: 2014–04
  15. By: Bijapur, Mohan
    Abstract: We study jointly the roles of aggregate and idiosyncratic uncertainty shocks in driving business cycle fluctuations. By decomposing total stock return volatility of over 20,000 publicly-listed US firms from 1962 to 2012, we construct separate indices for aggregate and idiosyncratic uncertainty, and run a horse race between them in an otherwise standard macroeconomic VAR. We find that idiosyncratic uncertainty shocks account for a large fraction of fluctuations in economic activity at business cycle frequencies, whereas the impacts of aggregate uncertainty are negligible. Idiosyncratic uncertainty, and not aggregate uncertainty, shocks produce the “sharp drop and rapid rebound” response in activity characterized in Bloom (2009). Idiosyncratic uncertainty shocks to large firms have more powerful macroeconomic impacts than small firms, suggesting “Granular” origins to the role of uncertainty in the macroeconomy. We also find evidence of an economy-wide “buffering effect”, in which the effects of large and small firms’ shocks exhibit a negative covariance which dampens down the aggregate effects of idiosyncratic uncertainty shocks on economic fluctuations.
    Keywords: Idiosyncratic uncertainty shocks; aggregate uncertainty shocks; business cycles; Granular origins.
    JEL: E32
    Date: 2014–11–01

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