|
on Business Economics |
| By: | Neil Lee |
| Abstract: | Growing cultural diversity is seen as important for innovation. Research has focused on two potential mechanisms: a firm effect, with diversity at the firm level improving knowledge sourcing or ideas generation, and a city effect, where diverse cities helping firms innovate. This paper uses a dataset of over 2,000 UK SMEs to test between these two. Controlling for firm characteristics, city characteristics and firm and city diversity, there is strong evidence for the firm effect. Firms with a greater share of migrant owners or partners are more likely to introduce new products and processes. This effect has diminishing returns, suggesting that it is a ‘diversity’ effect rather than simply the benefits of migrant run firms. However, there is no relationship between the share of foreign workers in a local labour market and firm level innovation, nor do migrant-run firms in diverse cities appear particularly innovative. But urban context does matter and firms in London with more migrant owners and partners are more innovative than others. |
| Keywords: | cultural diversity; innovation; cities; SMEs; migration |
| JEL: | J61 L21 M13 O11 O31 R23 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:57874&r=bec |
| By: | Lenno Uusküla |
| Abstract: | This paper examines the role of firm turnover in explaining inflation dynamics. I augment a New-Keynesian DSGE model with endogenous entry and exogenous stochastic exit and estimate with the Bayesian full information approach for the US economy. Results show that shocks to the entry cost explain more than half of the inflation variance at the business cycle frequencies. When it is cheap to create firms, the number of new firms goes up and inflation increases as labour intensive creation of firms pushes up the demand for labour. Only gradually, when the number of firms is high and the number of new firms goes down again, does inflation fall, as stressed by the standard mechanism for an increasing number of firms |
| Keywords: | inflation, New-Keynesian Phillips curve, firm turnover |
| JEL: | E32 C11 E23 |
| Date: | 2015–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2015-01&r=bec |
| By: | Nicholas Bloom; Raffaella Sadun; Renata Lemos; Daniela Scur; John Van Reenen |
| 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. We make some suggestions for both policy and future research. |
| Keywords: | management; organization; productivity |
| JEL: | J1 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58009&r=bec |
| By: | Oriana Bandiera; Raffaella Sadun |
| Abstract: | CEOs affect the performance of the firms they manage, and family CEOs seem to weaken it. Yet little is known about what top executives actually do, and whether it differs by firm ownership. We study CEOs in the Indian manufacturing sector, where family ownership is widespread and the productivity dispersion across firms is substantial. Time use analysis of 356 CEOs of listed firms yields three sets of findings. First, there is substantial variation in the number of hours CEOs devote to work activities, and longer working hours are associated with higher firm productivity, growth, profitability and CEO pay. Second, family CEOs record 8% fewer working hours relative to professional CEOs. The difference in hours worked is more pronounced in low competition environments and does not seem to be explained by measurement error. Third, difference in diffrences estimates with respect to the cost of effort, due to weather shocks and popular sport events, reveal that the observed difference between family and professional CEOs is consistent with heterogeneous preferences for work versus leisure. Evidence from six other countries reveals similar findings in economies at different stages of development. |
| JEL: | J1 |
| Date: | 2013–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58162&r=bec |
| By: | Alex Bryson; John Forth; Minghai Zhou |
| Abstract: | Despite their theoretical value in tackling principal–agent problems at low cost to firms there is almost no empirical literature on the prevalence and correlates of performance bonds posted by corporate executives. We show that they are an important feature in today's CEO labour market in China: around one-tenth of corporations deploy performance bonds and they are equivalent to around 14% of CEO cash compensation. Consistent with principal–agent theory bonds are negatively associated with firm sales volatility. The complementarity between bonds and other incentive mechanisms such as bonuses and stock holding is consistent with optimal reward structures for multi-tasking agents. Those CEOs posting bonds are higher in the Communist Party ranks, were promoted via tournaments, and run larger firms, findings consistent with using bonds as an incentive to attract and retain the most able workers. Although state-owned enterprises are just as likely as privately owned ones to use bonds in CEO contracts, some of the theoretical predictions which assume profit-maximising firms do not hold where the state has an ownership stake. |
| Keywords: | performance bonds; security deposits; executive compensation; state-ownership; agency theory |
| JEL: | G34 J31 J33 M12 M52 O16 P31 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:56360&r=bec |
| By: | Stefano Bianchini (Sant' Anna School of Advanced Studies; BETA, Université de Strasbourg); Jackie Krafft (Université Nice Sophia Antipolis; GREDEG-CNRS); Francesco Quatraro (Université Nice Sophia Antipolis and GREDEG-CNRS; Collegio Carlo Alberto; Department of Economics and Statistics Cognetti de Martiis, University of Torino); Jacques Ravix (Université Nice Sophia Antipolis; GREDEG-CNRS) |
| 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 ISS Risk 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. |
| Keywords: | Corporate governance, Age, Lifecycle, Innovation, Non-parametric regression, ISS Risk Metrics |
| JEL: | G30 L20 L10 O33 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2015-05&r=bec |
| By: | Rebecca Riley; Chiara Rosazza Bondibene; Garry Young |
| Abstract: | We investigate labor productivity dynamics amongst British businesses in the wake of the credit crisis of 2007/8. The external restructuring of firms (i.e. changes in market share, firm entry and exit) contributed to a fall in productivity growth relative to trend amongst small businesses in bank dependent industries, consistent with the idea that an adverse credit supply shock caused inefficiencies in resource allocation across firms. But, the major part of the decline in UK productivity growth following the credit crisis was accounted for by a widespread productivity shock within firms, pointing to the importance of other factors in explaining the Great Stagnation. |
| Keywords: | productivity growth; reallocation; Great Recession and Stagnation; credit shock |
| JEL: | E32 L11 O47 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58108&r=bec |
| By: | Holger M. Mueller; Paige P. Ouimet; Elena Simintzi |
| Abstract: | We examine how within-firm skill premia–wage differentials associated with jobs involving different skill requirements–vary both across firms and over time. Our firm-level results mirror patterns found in aggregate wage trends, except that we find them with regard to increases in firm size. In particular, we find that wage differentials between high- and either medium- or low-skill jobs increase with firm size, while those between medium- and low-skill jobs are either invariant to firm size or, if anything, slightly decreasing. We find the same pattern within firms over time, suggesting that rising wage inequality–even nuanced patterns, such as divergent trends in upper- and lower-tail inequality–may be related to firm growth. We explore two possible channels: i) wages associated with “routine” job tasks are relatively lower in larger firms due to a higher degree of automation in these firms, and ii) larger firms pay relatively lower entry-level managerial wages in return for providing better career opportunities. Lastly, we document a strong and positive relation between within-country variation in firm growth and rising wage inequality for a broad set of developed countries. In fact, our results suggest that part of what may be perceived as a global trend toward more wage inequality may be driven by an increase in employment by the largest firms in the economy. |
| JEL: | J24 J31 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20876&r=bec |
| By: | Iosifidi, Maria; Kokas, Sotirios |
| Abstract: | This paper exploits a unique data set on bank-firm relationships based on syndicated loan deals to examine the effect of banks’ credit risk and capital on firms’ risk and performance. Our data set is a multilevel cross-section, which essentially allows controlling for all bank and firm characteristics through respective fixed effects, thus avoiding concerns regarding omitted variables. We find that banks with higher credit risk are associated with more risky firms, with lower profitability and market value. In turn, we find that banks with higher risk-weighted capital ratios lend to riskier firms with less market value. Our results are indicative of a strong adverse selection mechanism and highlight the need to monitor the risky banks more closely, especially as we consider large and influential syndicated loan deals. |
| Keywords: | Bank-firm relationships; Risk; Performance; Syndicated loans |
| JEL: | G20 G21 G30 G32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61942&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 likely 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: | economic integration; European Union; export; globalization; industrial enterprise; industrial policy; innovation; manufacturing; sustainable development |
| JEL: | R14 J01 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:54877&r=bec |
| By: | Max Nathan |
| Abstract: | High levels of net migration to the UK have contributed to growing cultural diversity, and researchers are turning their attention to the long-term effects of diversity on productivity. Yet little is known about these issues. This paper asks: what are the links between the composition of firms' top teams and business performance? What role do ethnic diversity and co-ethnic networks play? And do cities amplify or dampen these channels? I explore using a rich dataset of over 6,000 English firms. Owners, partners and directors set firms' strategic direction. Top team demography might generate production externalities through diversity (a wider range of ideas/ experiences, helping problem solving) and/or 'sameness' (via specialist knowledge or better access to international markets). These channels may be balanced by internal downsides (lower trust) and external barriers (discrimination), so that overall effects on business performance are unclear. In addition, urban locations (particularly big cities) may amplify any demographics-performance effects. I create a repeat cross-section of firms from the RDA National Business Survey. I construct measures of diversity and sameness across ethnicity and gender 'bases', alongside information on revenues, product and process innovation. I then regress these measures of business performance on top team demographics, plus firm level controls, area, year and detailed industry fixed effects. My results suggest a non-linear link between diversity and business performance, which is net positive for process innovation and net negative for turnover. Further tests on diverse and minority/female-headed firms find positive links for diverse top teams, negative for minority and female-only top teams. This implies that while diversity has internal and external benefits, penalties from being 'too diverse' probably result from external constraints. Further tests for intervening effects of capital cities, metropolitan hierarchies and urban form find some evidence of amplifying and dampening effects – which are generally stronger in London and larger cities. |
| Keywords: | cities; innovation; entrepreneurship; cultural diversity; migration; gender |
| JEL: | J1 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:59250&r=bec |
| By: | Philippe Aghion; John Van Reenen; Nicholas Bloom |
| Abstract: | We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap. |
| Keywords: | uncertainty |
| JEL: | J1 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:57987&r=bec |