nep-bec New Economics Papers
on Business Economics
Issue of 2015‒01‒14
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Grown-up business cycles By Pugsley, Benjamin; Sahin, Aysegul
  2. Mandatory Costs By Firm Size Thresholds: Firm Location, Growth And Death In Sri Lanka By Abidoye, Babatunde; Orazem, Peter; Vodopivec, Milan
  3. Chinese and Indian Multinationals: A Firm-Level Analysis of their Investments in Europe By Amendolagine , Vito; Cozza , Claudio; Rabellotti , Roberta
  4. Modelling Firm and Market Dynamics - A Flexible Model Reproducing Existing Stylized Facts By Thomas Brenner; Matthias Duschl
  5. The Effect of Performance Pay on the Retention of Apprenticeship Graduates: A Panel Data Analysis By Miriam Rinawi; Uschi Backes-Gellner
  6. Entry and shakeout in dynamic oligopoly By Hünermund, Paul; Schmidt-Dengler, Philipp; Takahashi, Yuya
  7. Impact of Micro Economic Variables on Firms Performance By Hunjra, Ahmed Imran; Chani, Muhammad Irfan; Javed, Sehrish; Naeem, Sana; Ijaz, Muhammad Shahzad
  8. Dynamic Voluntary Advertising under Partial Market Coverage By Yohei Tenryu; Keita Kamei
  9. Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance By Guillermo Acuña; Jean P. Sepulveda; Marcos Vergara
  11. Tax planning of R&D intensive multinationals By Heckemeyer, Jost H.; Richter, Katharina; Spengel, Christoph
  12. Does combinatorial knowledge lead to a better innovation performance of firms? By Franz Tödtling; Markus Grillitsch
  13. EU Accession, Domestic Market Competition and Total Factor Productivity. Firm Level Evidence By Klaus S. Friesenbichler

  1. By: Pugsley, Benjamin (Federal Reserve Bank of New York); Sahin, Aysegul (Federal Reserve Bank of New York)
    Abstract: We document two striking facts about U.S. firm dynamics and interpret their significance for aggregate employment dynamics. The first observation is the steady decline in the firm entry rate over the last thirty years, and the second is the gradual shift of employment from younger to older firms over the same period. Both observations hold across industries and geographies. We show that, despite these trends, firms’ life-cycle dynamics and business-cycle properties have remained virtually unchanged. Consequently, the reallocation of employment toward older firms results entirely from the cumulative effect of the thirty-year decline in firm entry. This “start-up deficit” has both an immediate and a delayed (by shifting the age distribution) effect on aggregate employment dynamics. Recognizing this evolving heterogeneity is crucial for understanding shifts in aggregate behavior of employment over the business cycle. With mature firms less responsive to business cycle shocks, the cyclical component of aggregate employment growth diminishes with the increasing share of mature firms. At the same time, the trend decline in firm entry masks the diminishing cyclicality during contractions and reinforces it during expansions, which generates the appearance of jobless recoveries where aggregate employment recovers slowly relative to output.
    Keywords: firm dynamics; employment dynamics; business cycles; entrepreneurship
    JEL: E32 J00 L25 L26
    Date: 2014–12–01
  2. By: Abidoye, Babatunde; Orazem, Peter; Vodopivec, Milan
    Abstract: Sri Lanka's Termination of Employment of Workmen Act (TEWA) requires that firms with 15 or more workers justify layoffs and provide generous severance pay to displaced workers, with smaller firms being exempted. Although formally subject to TEWA, firms in Export Promotion Zones (EPZs) do not face the same constraints as nonEPZ firms due to size incentives and lax labor law enforcement in that sector.  In EPZ, 77% of firms have more than 15 employeses while 76% of nonEPZ firms are smaller than 15 employees. Panel data on all formal sector firms between 1995 and 2003 shows that 80% of the size gap is from sorting of large firms into the EPZ.  In addition, EPZ firms grow faster and are less likely to die than comparably sized nonEPZ firms. Despite its intent, TEWA lowered employment.
    Keywords: Firing Cost; Employment Protection; Firm Entry; Firm Growth; Threshold; Export Promotion Zone; Sri Lanka.
    JEL: J30
    Date: 2014–11–21
  3. By: Amendolagine , Vito (Dipartimento di Scienze Politiche Sociali – Università di Pavia); Cozza , Claudio (Dipartimento di Scienze Economiche, Aziendali, Matematiche e Statistiche- Università di Trieste); Rabellotti , Roberta (Dipartimento di Scienze Politiche Sociali – Università di Pavia)
    Abstract: In this paper we aim to contribute to the literature on Chinese and Indian multinationals investing in Europe, through an empirical investigation of their identity and characteristics and the association between these features and their international business strategies. The investigation exploits a dataset at the level of the investing firms. In relation to mode of entry, we find that the greenfield is a more likely option for large-sized companies, and that weak propensity for innovation is associated with a low probability to enter through a merger or acquisition. A high propensity for innovation is related to asset-seeking FDI, while high profitability is needed to invest in the core EU countries. Finally, very large size characterizes companies that invest in more than country.
    Keywords: China; India; FDI; firm-level data; MNEs
    JEL: F21 F23
    Date: 2014–12–15
  4. By: Thomas Brenner (Economic Geography and Location Research, Philipps-University, Marburg); Matthias Duschl (Economic Geography and Location Research, Philipps-University, Marburg)
    Abstract: This paper presents a firm and market model that is able to reproduce the empirically observed patterns on firm growth and its statistical characteristics. It goes beyond the existing firm models by reproducing all stylized facts established in the literature. Furthermore, the model is flexible so that it can be adapted to certain industries and life-cycle stages. We analyse and discuss the options that are provided by the various parameters in this sense.
    Keywords: Firm model, firm growth, market model, industry dynamics
    JEL: L11 L13 L22 L25 O12 C15
    Date: 2014–11–25
  5. By: Miriam Rinawi (Department of Business Administration, University of Zurich); Uschi Backes-Gellner (Department of Business Administration, University of Zurich)
    Abstract: A firm’s willingness to provide and pay for general training in the form of apprenticeship training crucially depends on whether it is able to recoup the training costs. A successful strategy is to retain the most productive apprentices after graduation. This article explores whether training firms can use performance pay plans as a successful retention mechanism. Economic theory predicts that inherently more productive workers self-select into performance pay jobs because of higher expected returns. Using representative data from a large employer-employee survey, we test whether a similar relationship exists in the apprenticeship-training context. Using a panel IV method, we find that both the magnitude and the likelihood of performance pay have a significantly positive effect on a firm’s share of internal apprenticeship graduates. Because of their higher retention success, performance pay firms are in turn better positioned to finance general training.
    Keywords: Keywords: apprenticeship training, vocational education, retention, hiring, performance pay, human capital theory
    JEL: J24 J33 C23
    Date: 2014–12
  6. By: Hünermund, Paul; Schmidt-Dengler, Philipp; Takahashi, Yuya
    Abstract: In many industries, the number of firms evolves non-monotonically over time. A phase of rapid entry is followed by an industry shakeout: a large number of firms exit within a short period. We present a simple timing game of entry and exit with an exogenous technological process governing firm efficiency. We calibrate our model to data from the post World War II penicillin industry. The equilibrium dynamics of the calibrated model closely match the patterns observed in many industries. In particular, our model generates richer and more realistic dynamics than competitive models previously analyzed. The entry phase is characterized by preemption motives while the shakeout phase mimics a war of attrition. We show that dynamic strategic incentives accelerate early entry and trigger the shakeout by comparing a Markov Perfect Equilibrium to an Open-loop Equilibrium.
    Keywords: Life Cycle,Dynamic Oligopoly,Preemption,War of Attrition,Penicillin
    JEL: L11
    Date: 2014
  7. By: Hunjra, Ahmed Imran; Chani, Muhammad Irfan; Javed, Sehrish; Naeem, Sana; Ijaz, Muhammad Shahzad
    Abstract: The aim of our study is to analyze the factors that affect performance of the cement sector focusing particularly on Pakistani firms. The study further finds the impact of size on performance, to examine the relationship between age of the firm and firm performance, to measure the effect of growth on firm’s performance and to highlight the impact of leverage on performance of the firm. There are twenty six cement companies listed in KSE. However, for the purpose of this paper only twenty companies were selected whose data was readily available over the period of eleven years from 2002 to 2012. Methodology: The data for the study was extracted from the annual reports of all the companies. In this study panel data analysis is used. Findings: After analyzing the data we have come to a point that all of the four variables have significant impact on the performance of the firm. We have seen that leverage has a positive impact effect on the performance of the firm when ROA is analyzed. Size, age and growth have a positive impact on return on equity (ROE) while leverage has a negative impact. Recommendations: This paper shows new insights for policy makers to improve the performance of Pakistani firms.
    Keywords: Microeconomic Variables, ROA, ROE, Panel approach, Cement sector
    JEL: D2 D24 D4 G31
    Date: 2014–02–16
  8. By: Yohei Tenryu (Graduate School of Economics, Osaka University); Keita Kamei (Graduate School of Economics, Kyoto University)
    Abstract: We consider a dynamic voluntary advertising model with a duopoly. Firms can use advertising and price as competitive tools where product quality is a given and the market is not fully covered by consumers. Advertising also plays a role as a public good. In this situation, we investigate how advertising, profits, and welfare respond to changes in consumer preference and product quality. We mainly find that a higher maximum preference value leads to increases in advertising, profits, and consumer surplus but a decrease in incumbent consumers’ utility. We further find that a technology improvement by a low-quality firm increase its profit and consumer surplus if the technology gap is relatively large but if this is not the case, then the innovation could have different effects on firms’ profits and consumer surplus.
    Keywords: Advertising, product quality, differential games, duopoly
    JEL: C72 C73 L13 M37
    Date: 2014–12
  9. By: Guillermo Acuña; Jean P. Sepulveda; Marcos Vergara (School of Business and Economics, Universidad del Desarrollo)
    Abstract: This paper analyzes whether family enterprises perform better than non-family enterprises, as found in previous studies on Chilean companies, based on the ownership structure of the business, which is an important factor in the literature on corporate governance that had not been taken into account. The analysis confirmed that family enterprises performed better than non-family enterprises and that the effect of ownership concentration on business performance depends on the type of enterprise, regardless of whether it is family-owned. Lastly, the results suggest that performance is better when there is a concentrated ownership, comprised both of shareholders who are family members and others who are not, than with other schemes of corporate governance.
    Keywords: Family-Owned Firms, Performance, Ownership Concentration
    JEL: G32 G20
    Date: 2014–01
  10. By: Milica Jakšiæ, Miloš Jakšiæ (Modern Business School, Belgrade)
    Abstract: Employee satisfaction related to their job, possibilities of career development, mechanisms of performance measurement and reward, as remuneration systems are of growing importance. Expectations of highly educated workforce continuously increase, so recruiting and retention of such workers becomes key factor of success for modern companies. Success of companies is expected to change together with employee saticfaction.
    Keywords: performance measurement, human resource management, employee satisfaction.
    JEL: M12 M51 M54
    Date: 2014–09
  11. By: Heckemeyer, Jost H.; Richter, Katharina; Spengel, Christoph
    Abstract: The allocation of management and control in the business decision process finds expression in the coordination intensity between agents in the firm. We develop and test a theory, based on the organizational design literature, for the intensity in which the tax department strives to coordinate with managers from other business units in order to intervene in investment decisions. Our theoretical considerations predict that R&D intensity is an important determinant of the tax department's role. Using data from a confidential survey taken in 2012 of top financial and tax managers of very large multinational companies, representing 8% of business R&D spending in the OECD, we indeed find supporting evidence that in R&D intensive multinational firms the tax department operates more as a controller than as a manager. In particular, tax departments of R&D intensive firms make less tax planning effort, are less ambitious to minimize the tax burden of the firm, are later involved in the decision-making process of a new investment project, but are more likely to have a veto right in the decision on a new investment project as compared to less R&D intensive firms. Conditional on R&D intensity, however, the level of intangible assets in the firm is associated with more tax planning efforts and ambitions. Our results are statistically significant and robust towards several sensitivity checks.
    Keywords: corporate taxation,organizational design,survey data
    JEL: H25 L22 M41
    Date: 2014
  12. By: Franz Tödtling; Markus Grillitsch
    Date: 2014
  13. By: Klaus S. Friesenbichler (WIFO)
    Abstract: In this paper we argue that changes in the EU membership status of the countries in Central and Eastern Europe led to less concentrated markets. This is due to the implementation of competition policy and other pro-competitive policies embedded in the Community Acquis, the body of European Union law. A regression analysis using data on 39,646 firms from six survey waves between 2002 and 2013 found EU membership to significantly increase the degree of domestic competition. While the effect of competition policy itself on market structures was statistically insignificant, the interaction between EU membership status and competition policy showed a strong and statistically significant competition enhancing effect. These findings were linked to a firm-level TFP analysis. Less concentrated markets were associated with higher productivity levels. This finding is robust after controlling for endogeneity issues. EU membership was only weakly associated with changes in TFP levels, but led to a decrease in the variance of the productivity measure across firms.
    Keywords: competition policy, productivity, Community Acquis, EU, Enterprise Surveys, ECA, CEE
    Date: 2014–12–18

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