nep-bec New Economics Papers
on Business Economics
Issue of 2015‒01‒31
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Estimating Management Practice Complementarity between Decentralization and Performance Pay By Bryan Hong ; Lorenz Kueng ; Mu-Jeung Yang
  2. Betting on Exports: Trade and Endogenous Heterogeneity By Alessandra Bonfiglioli ; Gino Gancia
  3. Exploration for Human Capital: Evidence from the MBA Labor Market By Camelia M. Kuhnen ; Paul Oyer
  4. Zipf's Law, Pareto¡¯s Law, and the Evolution of Top Incomes in the U.S. By Shuhei Aoki ; Makoto Nirei
  5. Import Penetration, Intermediate Inputs and Firms’ Productivity in the EU Food Industry By Olper, Alessandro ; Curzi, Daniele ; Raimondi, Valentina
  6. Bargains Followed by Bargains: When Switching Costs Make Markets More Competitive By Jason Pearcy
  7. Which firms use trademarks - and why? Representative firm-level evidence from Germany By Crass, Dirk
  8. Does Female Management Influence Firm Performance? Evidence from Luxembourg Banks By Reinert, Regina M. ; Weigert, Florian ; Winnefeld, Christoph H.
  9. Investors are unwilling to pay for corporate social responsibility activities: Evidence from India’s Companies Act 2013 By Parinduri, Rasyad ; Paul, Saumik
  10. Do exporting firms benefit from retail internationalization? Evidence from France By Cheptea, Angela ; Emlinger, Charlotte ; Latouche, Karine
  11. International diversification and performance in agri-food firms By Raúl Serrano ; Marta Fernández-Olmos ; Vicente Pinilla

  1. By: Bryan Hong ; Lorenz Kueng ; Mu-Jeung Yang
    Abstract: The existence of complementarity across management practices has been proposed as one potential explanation for the persistence of firm-level productivity differences. However, thus far no conclusive population-level tests of the complementary joint adoption of management practices have been conducted. Using unique detailed data on internal organization, occupational composition, and firm performance for a nationally representative sample of firms in the Canadian economy, we exploit regional variation in income tax progression as an instrument for the adoption of performance pay. We find systematic evidence for the complementarity of performance pay and decentralization of decision-making from principals to employees. Furthermore, in response to the adoption of performance pay, we find a concentration of decision-making at the level of managerial employees, as opposed to a general movement towards more decentralization throughout the organization. Finally, we find that adoption of performance pay is related to other types of organizational restructuring, such as greater use of outsourcing, Total Quality Management, re-engineering, and a reduction in the number of layers in the hierarchy.
    JEL: D2 H32 J33 L2 M1 M5
    Date: 2015–01
  2. By: Alessandra Bonfiglioli ; Gino Gancia
    Abstract: We study the equilibrium determinants of firm-level heterogeneity in a model in which firms can choose between different probability distributions when drawing productivity at the entry stage and explore the implications in closed and open economy. One novel result is that export opportunities, by increasing payoffs in the tail, induce firms to draw technology from riskier distributions. When more productive firms also pay higher wages, trade amplifies wage dispersion by inducing firms to take more risk ex-ante and hence making them more unequal ex-post. Our model is consistent with new evidence on how firm-level heterogeneity varies across U.S. industries.
    Keywords: firm heterogeneity, productivity dispersion, wage inequality, international trade
    JEL: F12 F16 E24
    Date: 2014–12
  3. By: Camelia M. Kuhnen ; Paul Oyer
    Abstract: We empirically investigate the effect of uncertainty on corporate hiring. Using novel data from the labor market for MBA graduates, we show that uncertainty regarding how well job candidates fit with a firm’s industry hinders hiring, and that firms value probationary work arrangements that provide the option to learn more about potential full-time employees. The detrimental effect of uncertainty on hiring is more pronounced when firms face greater firing and replacement costs, and when they face less direct competition from other similar firms. These results suggest that firms faced with uncertainty use similar considerations when making hiring decisions as when making decisions regarding investment in physical capital.
    JEL: G31 J44 M51
    Date: 2015–01
  4. By: Shuhei Aoki ; Makoto Nirei
    Abstract: This paper presents a tractable dynamic general equilibrium model of income and firm-size distributions. The size and value of firms result from idiosyncratic, firm-level productivity shocks. CEOs can invest in their own firms¡¯ risky stocks or in risk-free assets, implying that the CEO's asset and income also depend on firm-level productivity shocks. We analytically show that this model generates the Pareto distribution of top income earners and Zipf¡¯s law of firms in the steady state. Using the model, we evaluate how changes in tax rates can account for the recent evolution of top incomes in the U.S. The model matches the decline in the Pareto exponent of income distribution and the trend of the top 1% income share in the U.S. in recent decades. In the model, the lower marginal income tax for CEOs strengthens their incentive to increase the share of their firms¡¯ risky stocks in their own asset portfolios. This leads to both higher dispersion and concentration of income in the top income group. Length: 54 pages
  5. By: Olper, Alessandro ; Curzi, Daniele ; Raimondi, Valentina
    Abstract: The aim of this contribution is to study empirically the effect of trade liberalization on productivity growth exploiting a large micro-dataset of more than 20,000 French and Italian food firms, over the 2004-2012 period. This relationship has been studied focusing on import penetration at both industry and upstream sectors level, to investigate the role played by imports in intermediate inputs. Main findings show that import penetration in both final products and intermediate inputs systematically contributed to firm-level productivity growth. Yet, the productivity growth effect induced by import penetration in upstream sectors is 10 times higher than the one at the industry level. Horizontal import competition coming from the EU15 and OECD countries exerts the strongest effect on productivity growth. By contrast, when vertical import penetration is considered, also sourcing intermediate inputs from emerging markets appears important for firms’ productivity growth. Finally, we also find a strong confirmation that the effects of import penetration are increasing with the initial level of firms’ productivity. All these stylized facts may have interesting policy implications.
    Keywords: import penetration, intermediate inputs, firm-level TFP, food industry, Food Consumption/Nutrition/Food Safety, Production Economics, F14, F15, F61, L66, Q17,
    Date: 2015
  6. By: Jason Pearcy (Montana State University )
    Abstract: In markets where consumers have switching costs and firms cannot price discriminate, firms have two conflicting strategies. A firm can either offer a low price to attract new consumers and build future market share or a firm can offer a high price to exploit the partial lock-in of their existing consumers. This paper develops a theory of competition when overlapping generations of consumers have switching costs and firms produce differentiated products. Competition takes place over an infinite horizon with any number of firms. This paper shows that the relationship between the level of switching costs and the number of firms determines whether firms offer low or high prices. Similar to previous duopoly studies, switching costs are likely to facilitate higher equilibrium prices only when there is a small number of firms and switching costs are large. Unlike previous studies this paper demonstrates that with a sufficiently large number of firms, switching costs have the opposite effect and prices are lower with switching costs when compared to equilibrium prices without switching costs. The equilibrium of the model also contains realistic features uncommon to other models in the literature where some consumers switch in equilibrium and a symmetric pure strategy price exists with more than two firms.
    Keywords: Switching Costs, Product Differentiation, Dynamic Competition, Discrete Choice
    JEL: D2 D4 L1
    Date: 2009–04–28
  7. By: Crass, Dirk
    Abstract: Trademarking firms are more productive, generate higher profits, and have a better survival rate. Trademarking firms are in one word more successful, which might motivate non-trademarking firms to adopt a trademark strategy. But this seems not to be the case. The proportion of trademarking firms in the German business sector amounts to just 18%. This figure is quite low, given that nearly each firm has reputation to protect. But why has the vast majority of firms no registered trademarks? Using a representative sample of German firms, the present paper links certain firm characteristics to a firms' propensity to register trademarks. The empirical results point to circumstances under which trademarks are significantly more often used: this is the case where a large distance between a firm and its customers exists, a firm's product quality is difficult to assess, a firm's products are characterized by a limited (but not strong) substitutability, and where a firm is engaged in R&D and introduces innovative products. Trademarks are considerably less frequently used if none of this is the case.
    Keywords: Intellectual Property Rights,Trademarks,Reputation,Innovation
    JEL: C25 D21 L14 O34
    Date: 2014
  8. By: Reinert, Regina M. ; Weigert, Florian ; Winnefeld, Christoph H.
    Abstract: This study examines the relationship between the proportion of women in top management positions of banks and the financial performance of these institutions. Using prudential data from supervisory reporting for all credit institutions in the Grand-Duchy of Luxembourg from 1999 to 2013, we find a positive association between female management representation and firm performance. The economic effect is substantial: A 10% increase of women in top management positions improves the bank's future return on equity by more than 3% p.a. Moreover, we show that this positive relationship is (i) almost twice as large during the global financial crisis than in stable market conditions and (ii) non-linear with the most successful banks having a female management share in the range between 20% and 40%.
    Keywords: Management Diversity, Female Management Representation, Bank Performance
    JEL: G21 J16 L25 M14
  9. By: Parinduri, Rasyad ; Paul, Saumik
    Abstract: We examine the effects of corporate social responsibility (CSR) activities on the values of firms. Using a non-parametric regression discontinuity design, exploiting a natural experiment induced by India’s Companies Act 2013, we find investors devalue the stocks of firms that do CSR activities by 2-5%, which suggests investors are unwilling to pay for CSR activities.
    Keywords: corporate social responsibility, firm objectives, firm values
    JEL: G34 L21 M14
    Date: 2015–01
  10. By: Cheptea, Angela ; Emlinger, Charlotte ; Latouche, Karine
    Abstract: In this paper, we explore the link between globalization of the retail sector and the export activity of firms from their origin country. In a previous paper (Cheptea, Emlinger and Latouche, forthcoming), we showed that exporting firm from countries with internationalized retail companies benefit more from this process than firms from other countries. The underlying assumption of this paper is that the main benefits are grasped by the retailers’ domestic suppliers. In other words, firms that sell their products under retailers’ brands benefit more from the overseas expansion of retailers than other firms. We employ French firm-level data to evaluate the effect for the two types of firms. We identify retailers’ suppliers using the certification of French agri-food firms with the private IFS standard, granting them the right to sell their products under a retailer’s brand. Our empirical objective is to estimate whether firms with IFS certification have better export performance on markets where French retail companies have established outlets. We find that certified French firms export more than non-certified firms to markets where IFS retailers established outlets (mainly outside Europe). The difference is statistically significant and robust to the use of firm- and country-specific fixed effects. Results are similar for the extensive and the intensive margin of exports.
    Keywords: Multinational retailers, Firm-level exports, Private standards, Agribusiness, International Relations/Trade, F12, F14, F23,
    Date: 2014–08
  11. By: Raúl Serrano (Faculty of Economics and Business Studies, Universidad de Zaragoza ); Marta Fernández-Olmos (Faculty of Economics and Business Studies, Universidad de Zaragoza ); Vicente Pinilla (Faculty of Economics and Business Studies, Universidad de Zaragoza )
    Abstract: : This paper studies the relationship between international diversification and performance in agri-food firms In line with the recent literature, it analyses the effects of the degree of internationalization using a uniform sample, a long-term focus and a measure that combines export intensity and regional diversification. The study empirically confirms the hypothesis of a horizontal S-curve relationship between diversification and performance and identifies three phases. Novice export firms are found in the first stage; their profits are low because they incur in the initial costs of exporting. Mature companies with a more advanced internationalization process are in the second stage; they benefit from the positive outcomes of operating at a larger scale. Lastly, the third stage contains internationally over-diversified companies; their performance decreases as a result of costs to enter extra-regional markets, which are especially steep in this sector, and dealing with greater organisational complexity
    Keywords: : Agribusiness, International diversification, Firm performance, Degree of Internationalization
    JEL: F23 L66 Q13
    Date: 2015–01

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