nep-bec New Economics Papers
on Business Economics
Issue of 2015‒02‒16
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  2. Firm Performance and Trade with Low-Income Countries: Evidence from China By Schmerer, Hans-Jörg; Wang, Luhang
  3. What Determines Borrowing Costs at the Firm-Level: Firm-Specific and Aggregate Information By Fidrmuc, Jarko; Scharler, Johann
  4. Research on open innovation strategy and its performance in Korea smart media industry: Focusing on user innovation strategy By Na, Cheongho; Kim, Eungdo; Hwang, Junseok
  5. A Two-Sided Matching Approach for Partner Selection and Assessing Complementarities in Partners’ Attributes in Inter-Firm Alliances By Mindruta , Denisa; Moeen, Mahka
  6. The organization of knowledge in multinational firms By Gumpert, Anna
  7. Technology and the dynamics of comparative advantage By Antonio Navas
  8. Compulsory Disclosure of Private Information - Theoretical and Experimental Results for the Acquiring-a-Company Game By Zaby, Alexandra; Güth, Werner; Pull, Kerstin; Stadler, Manfred
  9. De Jure Determinants of New Firm Formation: How the Pillars of Constitutions Influence Entrepreneurship By E. Carbonara; E. Santarelli
  10. Asset Divestment as a Response to Media Attacks in Stigmatized Industries By Durand , Rodolphe; Vergne , Jean-Philippe
  11. Cross-Border Acquisitions and Restructuring: Multinational Enterprises versus Private Equity-Firms By Baziki, Selva; Norbäck, Pehr-Johan; Persson, Lars; Tåg, Joacim
  12. The Impact of EU Accession on Regional Business Cycle Synchronisation and Sector Specialisation By Jürgen Bierbaumer-Polly; Peter Huber; Petr Rozmahel
  13. The Great Recession, entrepreneurship, and productivity performance By Diez, Federico J.
  14. Are there Business Cycles beyond GDP? Alternative Measures to GDP at Business Cycle Frequencies By Maschke, Philip; Döpke, Jörg

  1. By: Triebs, Thomas; Tumlinson, Justin
    Abstract: Communism in East Germany sought to dampen the effect of market forces on firm productivity for nearly 40 years. How did East German firms respond to the free market after being thrust into it in 1990? We use a formal learning model and German business survey data to analyze the lasting impact of this far-reaching treatment on the way firms in former East Germany predicted their own productivity relative to firms in former West Germany during the two decades since Reunification. We find in confirmation of our formal model's predictions, that Eastern firms forecast productivity less accurately, particularly in dynamic and uncertain markets, but that the gap gradually closed over 12 to 13 years. Second, by analyzing the direction of firm level errors in conjunction with contemporaneous market signals we find that, in the years immediately following Reunification, Eastern firms estimate the market's role as generally less potent than Western firm do, an observation consistent with overweighting experiences from the communist era; however, over roughly 14 years both converge to the same (incorrect) overestimate of the market's role on their productivity.
    JEL: D21 D22 D83
    Date: 2014
  2. By: Schmerer, Hans-Jörg; Wang, Luhang
    Abstract: Krugman's (1979, 1980) monoplistic competition model of trade showed that countries with more similar per-capita GDP trade more with each other. Does this mean that developing countries shift trade towards developed countries as a result of high economic growth? The results reported in this paper challenge the link between per-capita GDP and trade predicted by the force of gravity. The matched customs-manufacturing firm data used in this study reveal a rising low-income country trade share around and after China's accession to the World Trade Organization. Based on this stylized fact we analyze the link between firm performance and different export strategies. We find strong evidence for sequential sorting into different export-modes. i) only the most productive firms export to low-income countries, ii) export to low-income countries is coupled to export to high-income countries, iii) younger firms solely export to export markets with higher potential, and iv) low-income markets are served additionally by older firms. Moreover, we find that entry into simultaneous exports to low- and high-income destinations is associated with a higher productivity compared to the average productivity measured by incumbents' firm performance.
    JEL: F10 O11 F15
    Date: 2014
  3. By: Fidrmuc, Jarko; Scharler, Johann
    Abstract: We analyze the relationship between firm-specific shocks and aggregate fluctuations. In particular, profitability of firms affected by a negative shock worsens. To the extent that the banks cannot distinguish between aggregate and firm-specific profitability shocks, they will adjust interest rates for all borrowers. We test the influence of individual and bank specific data on lending rate using individual data for firm-bank relationships in Germany between 2005 and 2007. We provide the evidence that firm lending conditions depend on both individual and aggregate profitability. This result is consistent with the interpretation that banks use firm-specific as well as aggregate information when setting corporate lending rates.
    JEL: E32 G21 L14
    Date: 2014
  4. By: Na, Cheongho; Kim, Eungdo; Hwang, Junseok
    Abstract: With the rapid development of ICT, smart society has been arrived. Smart devices also make user's role change and be powerful. In other words, user's power is stronger by smart devices in smart media industry and especially social environment like application market is catalyst for growth of user's role and power. On the other hand, it is hard for a firm to have all abilities and sources in this sudden change. Therefore, firms have to make their strategy considering user's role. For that reason, firms can use networks such as university, researcher, firm and user from the viewpoint of open innovation. I argue that users have some roles as one of the main agents in smart media industry affecting firm's strategy and performance.
    Keywords: Open innovation,smart media industry,strategy,performance,user’,s role
    Date: 2014
  5. By: Mindruta , Denisa; Moeen, Mahka
    Abstract: Strategic alliances are undertaken to create value through complementarities of resources and capabilities of the partner firms. The authors develop a matching framework to study strategic alliances, taking a market perspective that explicitly incorporates key features of transactions in strategic alliances: two sided decision making in voluntary collaboration; quest for complementarities between indivisible and heterogeneous partner attributes; and competition on each side for partners on the other side. They assess the relative performance of matching models and binary choice models when estimating parameters within simulations based on a known functional relationship. Within the context of research alliances in the bio-pharmaceutical industry, we hypothesize and find support using the matching model framework for complementarity in partner size, and in upstream research capabilities.
    Keywords: alliances; two-sided matching; maximum score estimator; bio-pharmaceutical industry; complementarity
    Date: 2014–11–22
  6. By: Gumpert, Anna
    Abstract: Employees must learn about firm technologies to use them in production. Within multinational firms, knowledge can be acquired centrally, by managers at headquarters, or locally, by production workers. Local knowledge acquisition increases with the bilateral communication costs with central management, and decreases with local knowledge acquisition costs. This mechanism explains why multinationals foreign sales and their probability of entry decrease in the distance of a country from the multinationals home country, and why multinationals pay higher wages than comparable domestic firms. The selection into foreign destinations and the foreign productivity distribution of German multinationals are consistent with the models predictions.
    JEL: F21 F23 D21
    Date: 2014
  7. By: Antonio Navas (Department of Economics, University of Sheffield)
    Abstract: This paper explores how trade openness affects both product and process innovation in a factor proportions model of trade and firm heterogeneity. Trade openness expands the profit opportunities of the most productive firms and expels the less efficient firms out of the market, making process innovation more attractive for the most productive firms in both industries. Incentives, however, are larger in the industry in which the country has the comparative advantage. Trade also increases the profits of prospective entrants leading to an increase in product innovation in the comparative advantage industry. In addition, I obtain a non-monotonic relationship between trade costs and a country's trade pattern: When the level of trade costs are high, a reduction in trade costs leads to an increase in process innovation in both industries, being stronger in the comparative advantage one; when the trade costs are low the effect is stronger in the comparative disadvantage one. This final result could rationalize recent empirical findings suggesting that in the last half century the Ricardian comparative advantage has become weaker over time.
    Keywords: Innovation, Firm Heterogeneity, Comparative Advantage.
    JEL: F12 F43
    Date: 2015–01
  8. By: Zaby, Alexandra; Güth, Werner; Pull, Kerstin; Stadler, Manfred
    Abstract: Based on the acquiring-a-company game of Samuelson and Bazerman (1985), we theoretically and experimentally analyze the acquisition of a firm. Thereby we compare cases of symmetrically and asymmetrically informed buyers and sellers. This setting allows us to predict and test the effects of information disclosure as prescribed by two recently implemented directives of the European Union, the Transparency and the Takeover-Bid Directive. Our theoretical and experimental results suggest a welfare-enhancing effect of compulsory information disclosure. Hence, the EU Transparency and the EU Takeover-Bid Directive should both be welfare enhancing.
    JEL: C91 D82 D61
    Date: 2014
  9. By: E. Carbonara; E. Santarelli
    Abstract: This paper provides empirical evidence supporting the view that constitutions may influence the organization of economic activities. Dealing with the issue of the institutional determinants of entrepreneurship, it shows that some of the provisions contained in national constitutions are positively and significantly associated to a standard measure of entrepreneurial dynamics, namely the rate of new business density. Using a novel dataset containing the characteristics of the constitutions enacted in the world and a sample of 115 countries, the paper finds that provisions about the right to conduct/establish a business, the right to strike, consumer protection, protection of trademarks, and education promote higher rates of new firm formation.
    JEL: D72 K10 H10 L26 M13 O50 P48
    Date: 2015–02
  10. By: Durand , Rodolphe; Vergne , Jean-Philippe
    Abstract: In stigmatized industries characterized by social contestation, hostile audiences, and distancing between industry insiders and outsiders, firms facing media attacks follow different strategies from firms in uncontested industries. Because firms avoid publicizing their tainted-sector membership, when threatened, they can respond by divesting assets from that industry. The authors' analyses of the arms industry demonstrate that media attacks on the focal firm and its peers both increase the likelihood of divestment for the focal firm. Specifically, attacks on the focal firm are the most consequential, followed by attacks on peers in the same industry subcategory, and by attacks on peers in different subcategories. These findings shed new light on divestment as a response to media attacks in stigmatized industries and lead the authors to rethink impression management theory.
    Keywords: stigma; impression management; divestment; media; categories; reputation; defense industry
    JEL: L14 L60 M10
    Date: 2014–03–25
  11. By: Baziki, Selva (Department of Economics); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)); Tåg, Joacim (Research Institute of Industrial Economics (IFN))
    Abstract: An increasingly large share of cross-border acquisitions are undertaken by private equity-firms (PE-firms) and not by traditional multinational enterprises (MNEs). We propose a model of cross-border acquisitions in which MNEs and PE-firms compete over domestic assets. MNEs' advantage lies in firm-specific synergies and retained earnings, whereas PE-firms are good at reorganizing target firms. Prevailing interest rates do not work in favor of PE-firms, but a lower risk premium and a better financial market development does. Stronger firm-specific synergies, however, favors MNEs. Performing a welfare analysis, we show that a policy of restricting PE-firms from buying domestic assets can be counterproductive.
    Keywords: Cross-border; International Restructuring; Ownership Efficiency; Private Equity; M&As
    JEL: F23 L13
    Date: 2015–01–26
  12. By: Jürgen Bierbaumer-Polly (WIFO); Peter Huber (WIFO); Petr Rozmahel
    Abstract: According to difference-in-difference estimates business cycle synchronisation and similarity in sector structures between acceding and pre-existing regions reduced after Eastern Enlargement. Results for Northern enlargement are more ambiguous. In both enlargements, however, region pairs affected by enlargement with highly synchronised business cycles before enlargement experienced smaller increases in business cycle synchronisation and weaker reductions of structural differences relative to similar unaffected region pairs than region pairs with less synchronised business cycles. Similarly, affected regions that were more similar in terms of sector structure before enlargement experienced larger reductions in structural differences and business cycle synchronisation than similar unaffected region pairs.
    Keywords: business cycle correlation, sector specialisation, EU enlargement, difference-in-difference
    Date: 2015–01–29
  13. By: Diez, Federico J. (Federal Reserve Bank of Boston)
    Abstract: In recent years, it is argued, the level of entrepreneurial activity in the United States has declined, causing concern because of its potential macroeconomic implications. In particular, it is feared that a lower rate of firm creation may be associated with lower productivity growth and, hence, lower economic growth in the coming years. This paper studies the issue, focusing on the dynamics of entrepreneurship and productivity around the time of the Great Recession. The author looks first at the recent evolution of alternative measures of entrepreneurship and of productivity, and then analyzes the relationship between the two concepts.
    Keywords: entrepreneurship; firm creation; productivity; TFP
    JEL: D24 L26 O47
    Date: 2014–11–01
  14. By: Maschke, Philip; Döpke, Jörg
    Abstract: We discuss properties of alternatives or complements to GDP as a measure of welfare at business cycle frequencies. We argue that these figures are not useful to measure the welfare costs of business cycles. First, data is not available at an appropriate quality and frequency. Second, since the suggested time series sometimes correlate negatively with each other composite indices will lead by construction to very low welfare costs of business cycles. Third, cross-section and quasi-panel evidence based on different samples of countries reveals no impact of the stance of the business cycle on some suggested welfare measures.
    JEL: D60 E32 I31
    Date: 2014

This nep-bec issue is ©2015 by Vasileios Bougioukos. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.