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on Business Economics |
| By: | Petr Sedlacek; Vincent Sterk |
| Abstract: | This paper shows that job creation of cohorts of U.S. firms is strongly influenced by aggregate conditions at the time of their entry. Using data from the Business Dynamics Statistics (BDS) we follow cohorts of young firms and document that their employment levels are very persistent and largely driven by the intensive margin (average firm size) rather than the extensive margin (number of firms). To differentiate changes in the composition of startup cohorts from post-entry choices and to evaluate aggregate effects, we estimate a general equilibrium firm dynamics model using BDS data. We find that even for older firms, the aggregate state at birth drives the vast majority of variations in employment across cohorts of the same age. The key force behind this result are fluctuations in the composition of startup cohorts with respect to firms' potential to grow large. At the aggregate level, factors determined at the startup phase account for the large low-frequency fluctuations observed in the employment rate. |
| Keywords: | firm dynamics; heterogeneous agents; maximum likelihood; DSGE |
| JEL: | E32 L11 M13 |
| Date: | 2014–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58223&r=bec |
| By: | Mauricio Vargas |
| Abstract: | As emphasized by Hausmann, Rodrik and Velasco, the policy challenge of boosting growth requires prioritization and identifying what are the most binding constraints. This paper draws on firm-level data from the World Bank Enterprise Survey, which suggests that the obstacles for the functioning of firms is related to firm size. Recognizing the potential endogeneity and simultaneity between firms' constraints and firm size, we implement an Ordered-Probit model with a potential categorical endogenous regressor to estimate, for the case of Bolivia, the conditional probability of facing obstacles given the firm size category, while controlling for other factors. The results confirm the importance of allowing for the roles of firm size in identifying constraints and suggest priorities for policies to remove constraints to economic performance. |
| Keywords: | Economic growth;Business enterprises;Bolivia;Econometric models;Firm Size, Firms’ Constraints, IV-Oprobit, Bolivia |
| Date: | 2015–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/3&r=bec |
| By: | Gregory Corcos; Delphine M. Irac; Giordano Mion; Thierry Verdier |
| Abstract: | How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation. |
| Keywords: | intrafirm trade; outsourcing; firm heterogeneity; incomplete contracts; inter-nationalization strategies; quality of institutions; extensive margin; intensive margin. |
| JEL: | F12 F19 F23 |
| Date: | 2013–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:42706&r=bec |
| By: | Rui Li (University of Massachusetts Boston); Dana Kiku (University of Ilinois); Hengjie Ai (University of Minnesota) |
| Abstract: | We present a general equilibrium-mechanism design model with two-sided limited commitment that accounts for the observed heterogeneity in firms’ investment, payout and CEO-compensation policies. In the model, shareholders cannot commit to holding negative net present value projects, and managers cannot commit to compensation plans that yield life-time utility lower than their outside options. Firms operate identical constant return to scale technologies with i.i.d. productivity growth. Consistent with the data, the model endogenously generates a power law in firm size and a power law in CEO compensation. We also show that the model is able to quantitatively explain the observed negative relationship between firms' investment rates and size, the positive relationship between firms' size and their dividend and CEO payout, as well as variation of firms' investment and payout policies across both size and age. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:855&r=bec |
| By: | Carlo Altomonte; Tommaso Aquilante; Gábor Békés; Gianmarco I. P. Ottaviano |
| Abstract: | We use a representative and cross-country comparable sample of manufacturing firms (EFIGE) to document patterns of interaction among firm-level internationalization, innovation and productivity across seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom). We find strong evidence of positive association among the three firm-level characteristics across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization because internationalization goes beyond export and because, in the medium-to-long term, internationalization is driven by innovation. We recommend coordination and integration of internationalization and innovation policies ‘under one roof’ at both the national and EU levels, and propose a bigger coordinating role for EU institutions. |
| Keywords: | Internationalization; innovation; firm-level data; exports; foreign direct investment; outsourcing |
| JEL: | F13 F23 O31 O38 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60275&r=bec |
| By: | Giroud, Xavier; Mueller, Holger M |
| Abstract: | We document how a shock to investment opportunities at one plant (“treated plant”) spills over to other plants within the same firm, but only if the firm is financially constrained. To provide the treated plant with resources, headquarters withdraws capital and labor from other plants, especially from plants that are relatively less productive, not part of the firm’s core industries, and located far away from headquarters. As a result of the resource reallocation, aggregate firm-wide productivity increases. We do not find any evidence of capital or labor spillovers among plants of financially unconstrained firms. |
| Keywords: | Internal Capital Markets |
| JEL: | G31 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10360&r=bec |
| By: | Forslid, Rikard (Stockholm University and CEPR); Okubo, Toshihiro (Keio university); Ulltveit-Moe, Karen Helene (University of Oslo and CEPR) |
| Abstract: | This paper develops a theoretical model of trade and environmental emissions with heterogeneous firms, where firms make abatement investments and thereby affect their level of emissions. We show that investments in abatement are positively related to firm productivity and firm exports, while emission intensity is negatively related to firms' productivity and exports. The basic reason for these results is that a larger production scale supports more investments in abatement and, in turn, reduces emissions per output. We find that trade liberalization weeds out the least productive and dirtiest firms thereby shifting production away from relatively dirty low productive local firms to more productive and cleaner exporters. The overall effect of trade is therefore to reduce emissions. We test the empirical implications of the model on emission intensity, abatement and exporting using firm-level data from Sweden. The empirical results support our model. |
| Keywords: | Heterogeneous firms; environmental emissions; abatement; international trade |
| JEL: | F12 F14 F18 Q56 |
| Date: | 2015–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2015_0002&r=bec |
| By: | Bianchini, Stefano; Krafft, Jackie; Quatraro, Francesco; Ravix, Jacques (University of Turin) |
| Abstract: | This paper investigates the relationship between corporate governance (CG) and innovation according to firms’ age by combining insights from the recent strand of contributions analysing CG and innovation with the lifecycle literature. We find a negative relationship between CG and innovation which is stronger for young firms than for mature ones. The empirical analysis is carried out on a sample of firms drawn from the ISSR isk Metrics database and observed over the period 2003 -2008. The parametric methodology provides results that are consistent with the literature and supports the idea that mature firms are better off than young ones. We check for possible non-linearities by implementing a non-parametric analysis and suggest that the negative relationship between CG and innovation is mostly driven by higher values of CG. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:uto:dipeco:201504&r=bec |
| By: | Davide Antonioli (Dipartimento di Economia e Management, Via Voltapaletto 11, Ferrara, Italy.); Grazia Cecere (Telecom Ecole de Management, Institut Mines-Telecom d Author-Name: Massimiliano Mazzanti) |
| Abstract: | We analyse how the joint adoption of ICT practices and environmental innovation affect the labour productivity of firms. We study complementarity in innovation adoption, with respect to the specific research hypotheses that the higher thediffusion and radicalness of ICT and EI, the higher might firm\rquote s productivitybe. As ICT are considered to be able to reduce the environmental footprint of different economics activities. We exploit original survey data which cover manufacturing firms for a dense SME area in the North-East of Italy (Emilia-Romagna region). We originally merge innovation survey data over 2006-2008 with firm\rquote s balance sheets over 2010-2011 to achieve this aim.The empirical evidence shows that for Emilia-Romagna manufacturing firms there are still wide margins for improving ICT-EIs integration in order to exploit their potential benefits on firm economic performance. However, the awareness of specific synergies seems to mainly characterizethe heavy polluting firms, subject to ETS schemes, while for the remaining firms prevalently emerge some substitutabilityrelations between ICT and EI. The latter firms are strategically less capable of exploiting the potential synergies between ICT and EI. |
| Keywords: | ICT, environmental innovation, adoption, SME, polluting sectors, Porter hypothesis, complementarity, labor productivity. |
| JEL: | D22 L23 L25 L60 M15 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:srt:wpaper:1514&r=bec |
| By: | Thomas Sampson |
| Abstract: | This paper develops an idea flows theory of trade and growth with heterogeneous firms. New firms learn from incumbent firms, but the diffusion technology ensures entrants learn not only from frontier technologies, but from the entire technology distribution. By shifting the productivity distribution upwards, selection on productivity causes technology diffusion and this complementarity generates endogenous growth without scale effects. On the balanced growth path, the productivity distribution is a traveling wave with an increasing lower bound. Growth of the lower bound causes dynamic selection. Free entry mandates that trade liberalization increases the rates of technology diffusion and dynamic selection to offset the profits from new export opportunities. Consequently, trade integration raises long-run growth. The dynamic selection effect is a new source of gains from trade not found when firms are homogeneous. Calibrating the model implies that dynamic selection approximately triples the gains from trade relative to heterogeneous firm economies with static steady states. |
| Keywords: | International trade; firm heterogeneity; technology diffusion; endogenous growth |
| JEL: | F12 O41 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60363&r=bec |
| By: | Jia Chen; Kewei Hou; René M. Stulz |
| Abstract: | Using theories from the behavioral finance literature to predict that investors are attracted to industries with more salient outcomes and that therefore firms in such industries have higher valuations, we find that firms in industries that have high industry-level dispersion of profitability have on average higher market-to-book ratios than firms in low dispersion industries. This positive relation between market-to-book ratios and industry profitability dispersion is economically large and statistically significant and is robust to controlling for variables used to explain firm-level valuation ratios in the literature. Consistent with the mispricing explanation of this finding, we show that firms in less boring industries have a lower implied cost of equity and lower realized returns. We explore alternative explanations for our finding, but find that these alternative explanations cannot explain our results. |
| JEL: | G12 G14 G31 G32 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20880&r=bec |
| By: | Hien Thu Pham (Oregon State University, USA); Shino Takayama (School of Economics, The University of Queensland) |
| Abstract: | This paper investigates empirically the relationship between firm size and production efficiency, and the relationship between firm size and the likelihood of paying bribes using firm-level data from Vietnam. Our analysis indicates that middle-sized firms’ production efficiencies tend to be lower than small-sized or large-sized firms in most of the manufacturing industries, and as firm size increases, the likelihood of paying bribes also increases. Firm size distribution has been a particular concern of economists for almost a century, and more recently, there has been increasing interest in the firm size distribution of developing nations, particularly the missing middle phenomenon, which refers to the fact that the distribution of firm size in developing countries tends to be bimodal. Our empirical results shed light on the relationship between firm size, production and corruption, and provide insights into these relations. |
| Keywords: | Bribe,Firm size distribution |
| JEL: | D21 D22 L25 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uqcepa:100&r=bec |
| By: | Alex Bryson; John Forth; Lucy Stokes |
| Abstract: | Despite its potential to raise productivity, performance-related-pay (PRP) is not widespread in market-oriented economies. Furthermore, despite secular changes conducive to its take-up, there is mixed evidence as to whether it has become more prominent over time. Ours is the first paper to present firm-level data for the Britain on both the incidence and size of bonus payments in the 2000s. We decompose the share of the total wage bill accounted for by bonuses into the shares of employment in the PRP and non-PRP sectors, the ratio of base pay between the two sectors, and the gearing of bonus payments to base pay within the PRP sector. We show that there was some growth in the share of total pay accounted for by bonuses in Britain in the mid-2000s. However this rise – and subsequent fluctuations since the onset of recession in 2008 – can be almost entirely explained by changes in the gearing of bonus to base pay within the PRP sector. There has been no substantial change in the percentage of employment accounted for by PRP firms; if anything it has fallen over the past decade. Furthermore, the movements in the gearing of bonuses to base pay in the economy at large are heavily influenced by changes in the Finance industry: a sector which accounts for a large proportion of all bonus payments in the British economy. |
| Keywords: | Performance pay; bonuses; recession; business cycle; finance |
| JEL: | J33 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60266&r=bec |
| By: | Neil Lee; Max Nathan |
| Abstract: | A growing body of research is making links between diversity and the economic performance of cities and regions. Most of the underlying mechanisms take place within firms, but only a handful of organization-level studies have been conducted. We contribute to this underexplored literature by using a unique sample of 7,600 firms to investigate links among cultural diversity, innovation, entrepreneurship, and sales strategies in London businesses between 2005 and 2007. London is one of the world's major cities, with a rich cultural diversity that is widely seen as a social and economic asset. Our data allowed us to distinguish owner/partner and wider workforce characteristics, identify migrant/minority-headed firms, and differentiate firms along multiple dimensions. The results, which are robust to most challenges, suggest a small but significant “diversity bonus” for all types of London firms. First, companies with diverse management are more likely to introduce new product innovations than are those with homogeneous “top teams.” Second, diversity is particularly important for reaching international markets and serving London's cosmopolitan population. Third, migrant status has positive links to entrepreneurship. Overall, the results provide some support for claims that diversity is an economic asset, as well as a social benefit. |
| Keywords: | cultural diversity; innovation; entrepreneurship; management; immigration; economic development; diasporas; cities; London |
| JEL: | N0 |
| Date: | 2013–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:52363&r=bec |