nep-bec New Economics Papers
on Business Economics
Issue of 2015‒01‒03
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Market Size, Competition, and the Product Mix of Exporters By Thierry Mayer; Marc J. Melitz; Gianmarco Ottaviano
  2. Job creation, firm creation, and de novo entry By Geurts, Karen; Van Biesebroeck, Johannes
  3. The new empirical economics of management By Bloom, Nicholas; Lemos, Renata; Sadun, Raffaella; Scur, Daniela; Van Reenen, John
  4. When Arm’s Length is Too Far : Relationship Banking over the Business Cycle By Beck, T.H.L.; Degryse, H.A.; de Haas, R.; van Horen, N.
  5. An international cohort comparison of size effects on job growth By Anyadike-Danes, Michael; Bjuggren, Carl-Magnus; Gottschalk, Sandra; Hölzl, Werner; Johansson, Dan; Maliranta, Mika; Myrann, Anja
  6. Determinants of research-based spin-offs survival By Oscarina Conceição; Ana Paula Faria
  7. University knowledge and firm innovation. Evidence from European countries By Andrea Bellucci; Luca Pennacchio
  8. Business Dynamics and Red Tape Barriers By Daria Ciriaci
  9. Quality Pricing-to-Market By Auer, Raphael; Chaney, Thomas; Sauré, Philip
  10. Firm heterogeneity in productivity across Europe. What explains what? By Francesco Aiello; Fernanda Ricotta
  11. On corporate financial distress prediction: what can we learn from private firms in a small open economy? By Evangelos C. Charalambakis

  1. By: Thierry Mayer (Département d'économie); Marc J. Melitz (Department of Economics); Gianmarco Ottaviano (Università di Bologna)
    Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
    JEL: D21 D24 F13 F14 F41 L11
    Date: 2014–02
  2. By: Geurts, Karen; Van Biesebroeck, Johannes
    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.
    Keywords: employment growth; firm dynamics; Gibrat's law
    JEL: E24 L16 L25
    Date: 2014–08
  3. By: Bloom, Nicholas; Lemos, Renata; Sadun, Raffaella; Scur, Daniela; Van Reenen, John
    Abstract: Over the last decade the World Management Survey (WMS) has collected firm-level management practices data across multiple sectors and countries. We developed the survey to try to explain the large and persistent TFP differences across firms and countries. This review paper discusses what has been learned empirically and theoretically from the WMS and other recent work on management practices. Our preliminary results suggest that about a quarter of cross-country and within-country TFP gaps can be accounted for by management practices. Management seems to matter both qualitatively and quantitatively. Competition, governance, human capital and informational frictions help account for the variation in management.
    Keywords: management; organization; productivity
    JEL: L2 M2 O14 O32 O33
    Date: 2014–06
  4. By: Beck, T.H.L. (Tilburg University, Center For Economic Research); Degryse, H.A. (Tilburg University, Center For Economic Research); de Haas, R. (Tilburg University, Center For Economic Research); van Horen, N.
    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
  5. By: Anyadike-Danes, Michael; Bjuggren, Carl-Magnus; Gottschalk, Sandra; Hölzl, Werner; Johansson, Dan; Maliranta, Mika; Myrann, Anja
    Abstract: The contribution of different-sized businesses to job creation continues to attract policymakers' attention, however, it has recently been recognized that conclusions about size were confounded with the effect of age. We probe the role of size, controlling for age, by comparing the cohorts of firms born in 1998 over their first decade of life, using variation across half a dozen northern European countries Austria, Finland, Germany, Norway, Sweden, and the UK to pin down size effects. We find that a very small proportion of the smallest firms play a crucial role in accounting for cross-country differences in job growth. A closer analysis reveals that the initial size distribution and survival rates do not seem to explain job growth differences between countries, rather it is a small number of rapidly growing firms that are driving this result.
    Keywords: birth cohort,firm age,firm size,firm survival,firm growth,distributed micro-data analysis
    JEL: L25 L26 E24 M13
    Date: 2014
  6. By: Oscarina Conceição (DINÂMIA-CET, University Institute of Lisbon, Lisbon, Portugal & Polytechnic Institute of Cavado and Ave); Ana Paula Faria (Universidade do Minho - NIPE)
    Abstract: Existing literature has shown that research-based spin-offs firms usually exhibit lower death risks than other start-ups. However, few studies have focused on the survival determinants of these particular firms. From a unique self-collected database of the population of research-based spin-offs created in Portugal from 1995 up to 2007 we analyze if founding conditions, parent organization characteristics and location characteristics play a role on their survival. Our results show that start-up size, firm age, parent reputation and region characteristics are key determinants of research-based spin-offs survival, casting doubts on the role played by the incubation process and the social ties with the parent organization as advanced in previous studies.
    Keywords: academic spin-offs; firm survival; duration analysis; group effects models
    JEL: L25 D22 O30 C41
    Date: 2014
  7. By: Andrea Bellucci; Luca Pennacchio
    Abstract: In recent decades firms have intensified the exploration of external sources of knowledge to enhance their innovation capabilities. This paper presents an empirical analysis of the factors that affect the importance of academic knowledge for firms’ innovative activities. An integrated approach that simultaneously considers country-level and firm-level factors is adopted. Regarding the former factors, the analysis shows that the entrepreneurial orientation of university and the quality of academic research increase the importance of knowledge transfers from universities to firms. This suggests that the environmental and institutional context contribute to explain cross-national disparities in university-industry interactions and in the effectiveness of knowledge transfer. In regard to the latter factors, the results indicate that firms oriented toward open search strategies and radical innovations are more likely to draw knowledge from universities. Furthermore, firms belonging to high technology sectors and firms with high absorptive capacity place greater value on the various links with universities. With respect to firm size the estimates show an inverted U-shaped relation with the importance of universities as a source of knowledge. However, the greatest benefits from interacting with universities are achieved by small and young research-active firms.
    Keywords: Innovation, industry-university links, knowledge transfer, university entrepreneurial orientation
    JEL: O32 O33 L20
    Date: 2014–11
  8. By: Daria Ciriaci
    Abstract: This study examines the impact of reforms aimed at reducing red tape barriers for new firms and new exporters in 17 EU Member States. The results confirm that higher bureaucratic barriers are associated with lower entry dynamics and suggest that recent reforms in Portugal, Spain and Italy should have a significant positive impact. The ability of new firms to enter markets is a key element of the transmission mechanism through which market reforms ultimately affect productivity and growth. Reforms that make it easier for new firms to enter therefore have the added benefit of enabling other competition-enhancing reforms to achieve their maximum impact. The report looks at data for Austria, Belgium, the Czech Republic, Germany, Denmark, Estonia, Spain, Finland, France, Hungary, Italy, the Netherlands, Poland, Portugal, Sweden, Slovakia and the UK between 2004 and 2011.
    JEL: D21 D22
    Date: 2014–09
  9. By: Auer, Raphael; Chaney, Thomas; Sauré, Philip
    Abstract: We examine firm's pricing-to-market decisions in vertically differentiated industries featuring a large number of firms that compete monopolistically in the quality space. Firms sell goods of heterogeneous quality to consumers with non-homothetic preferences that differ in their income and thus their marginal willingness to pay for quality increments. We derive closed-form solutions for the pricing game under costly international trade, thus establishing existence and uniqueness. We then examine how the interaction of good quality and market demand for quality affects firms' pricing-to-market decisions. The relative price of high quality goods compared to that of low quality goods is an increasing function of the income in the destination market. When relative costs change, the rate of exchange rate pass-through is decreasing in quality in high income countries, yet increasing in quality in low-income countries. We then document that these predictions receive empirical support in a dataset of prices and quality in the European car industry.
    Keywords: exchange rate pass-through; intra-industry trade; monopolistic competition; pricing-to-market; vertical differentiation
    JEL: E3 E41 F12 F4 L13
    Date: 2014–07
  10. By: Francesco Aiello; Fernanda Ricotta
    Abstract: There is a substantial heterogeneity in productivity when comparing individual firms. However, even when heterogeneity is found, some questions still remain unaddressed. For instance, when focusing on EU nothing is known about the importance of firms' heterogeneity compared with that of location. This is a point to be addressed on empirical grounds: location is expected to affect firms, but there is no evidence quantifying the magnitude of these two effects across Europe. How much the difference is due to individual heterogeneity and how much it is a result of territorial influences? We depart from these arguments and contributes to the issue of EU TFP divide by questioning if differences in TFP levels depend on firms and regional specific effects. In other words, does location matter in understanding TFP regional disparities across Europe? If it does, how much of TFP variability is the result of being located in a region instead of in another. And, what about country-effects? In order to answer to these questions, we proceed by using data of firms operating in the seven European countries comprised in the EFIGE dataset (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom, henceforth, EU7-EFIGE countries). In this respect, when focusing on these countries, the role of being located in different regions will be investigated, net of the country-effect. Furthermore, a deep-analysis on the impact of regionalism within a given country, will be made by focusing on France, Italy and Spain. The key variable of the study is the TFP, which has been calculated at firm level by Bruegel for 2008 by employing the Levinsohn and Petrin (2003) approach. The empirical setting we propose is consistent with the type of analysis we carry out. Indeed, in order to explain the role of different factor in explaining firms' TFP, we consider the multilevel approach. This model allows us to evaluate whether and to what extent space matters in determining firms' performance. In fact, multilevel regressions combine different levels of data aggregation and relate them in ways that render the simultaneous existence of distinct level-one and level-two equations explicit. After having found high TFP heterogeneity across firms and regions, we confirm that firm-specific characteristics greatly affect individual TFP. They dominate to location. Another evidence regards the regional effect. It is high when estimations disregard the country-effects: in such a case, location across EU regions explains about 15.2% of the firms differences in TFP. After controlling for country-effects, we find that about 95.3% of the variance in European firms' TFP is due to firms' characteristics and 4.7% is ascribable to regionalism. These proportions slightly differ when considering the case of France, Italy and Spain and when regressions attempt to capture the role of sectoral membership.
    Keywords: Total Factor Productivity; Firms? Heterogeneity; Sectoral innovation; Geography; Cross-Classified Models;
    JEL: L60 L25 O33
    Date: 2014–11
  11. By: Evangelos C. Charalambakis (Bank of Greece)
    Abstract: We use a large panel dataset that includes nearly 31,000 Greek private firms to investigate which variables impact on the prediction of corporate financial distress. Based on a multi-period logit model that accounts for industry effects, we identify six firm-specific variables that best describe the probability of financial distress for Greek private firms. In particular, the results show that profitability, leverage, the ratio of retained earnings to total assets, the ability of a firm to export, liquidity and the ability of a firm to pay out dividends are strong predictors of financial distress. We also find that GDP growth and a dummy variable that considers the effect of the Greek debt crisis affect the probability of financial distress. In-sample and out-of-sample forecast tests show that the model that includes the six firm-specific variables , GDP growth and industry dummies exhibits the highest predictive ability. Finally, the predictive ability of the model remains high when we increase the forecast horizon.
    Keywords: corporate financial distress; bankruptcy prediction; hazardmodel; financial statements
    JEL: G13 G17 G33 C41
    Date: 2014–11

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