nep-bec New Economics Papers
on Business Economics
Issue of 2015‒02‒28
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. The internet as a general-purpose technology : firm-level evidence from around the world By Clarke, George R.G. ; Qiang, Christine Zhenwei ; Xu, Lixin Colin
  2. Asymmetric firm dynamics under rational inattention By Cheremukhin, Anton A. ; Tutino, Antonella
  3. Social Capital, Trust, and Firm Performance during the Financial Crisis By Lins, Karl ; Servaes, Henri ; Tamayo, Ane
  4. Does Innovation Mediate Good Firm Performance? By Llanto, Gilberto M. ; del Prado, Fatima
  5. Self-Fulfilling Credit Cycles By Yi Wen ; Leo Kaas ; Costas Azariadis
  6. Managing the Family Firm: Evidence from CEOs at Work By Bandiera, Oriana ; Prat, Andrea ; Sadun, Raffaella
  7. Educational Mismatch and Firm Productivity: Do Skills, Technology and Uncertainty Matter? By Benoît Mahy ; François Rycx ; Guillaume Vermeylen
  8. Diversification, Organization, and Value of the Firm By USHIJIMA Tatsuo
  9. FDI and Heterogeneous Performance of European Enterprises By Valeria Gattai ; Giorgia Sali
  10. Competition, outside directors and executive turnover: Implications for corporate governance in the EU By Buchwald, Achim
  11. Size Distribution of Portuguese Firms between 2006 and 2012 By Mário Augusto ; Rui Pascoal ; Ana Margarida Monteiro
  12. State-Dependent Pricing, Firm Entry and Exit, and Non-Neutrality of Money By Koki Oikawa ; Kozo Ueda

  1. By: Clarke, George R.G. ; Qiang, Christine Zhenwei ; Xu, Lixin Colin
    Abstract: This paper uses firm-level data to assess whether telecommunication services are general-purpose technologies (technologies that benefit a large segment of the economy and have long-lasting effect). It finds that only Internet services are so: firm growth and productivity are much higher when Internet access is greater and when firms use the Internet more intensively; and Internet access benefits firms in high- and low-tech industries, firms of all sizes, and exporter and non-exporter firms. Small firms appear to benefit more from the Internet than large firms do. In contrast, fixed-line and cellular services are not robustly linked to firm performance.
    Keywords: Technology Industry,E-Business,ICT Policy and Strategies,Telecommunications Infrastructure,Microfinance
    Date: 2015–02–01
  2. By: Cheremukhin, Anton A. (Federal Reserve Bank of Dallas ); Tutino, Antonella (Federal Reserve Bank of Dallas )
    Abstract: We study the link between business failures, markups and business cycle asymmetry in the U.S. economy with a model of optimal firm exit under rational inattention. We show that the model's predictions of lagged, counter-cyclical and positively skewed markups together with counter-cyclical exit rates are consistent with the empirical evidence. Moreover, our model uncovers a new mechanism that links information processing with the business cycle. It predicts counter-cyclical attention to economic conditions consistent with survey evidence.
    Keywords: Information; markups; exit rates; rational inattention.
    JEL: C63 D21 D22 D80 E32
    Date: 2014–11–01
  3. By: Lins, Karl ; Servaes, Henri ; Tamayo, Ane
    Abstract: We study the extent to which a firm’s social capital, as measured by the intensity of a firm’s corporate social responsibility (CSR) activities, affects firm performance during the 2008-2009 financial crisis. We find that high-CSR firms have crisis-period stock returns that are four to five percentage points higher than low-CSR firms, all else equal. In contrast, we find no difference in returns between high- and low-CSR firms either before or after the crisis. During the crisis, high-CSR firms also experience higher profitability, sales growth, and sales per employee and a decline in their accounts receivable relative to low-CSR firms. This evidence is consistent with the view that the trust between the firm and its stakeholders and investors, built through investments in social capital, pays off when the overall level of trust in corporations and markets suffers a negative shock.
    Keywords: corporate social responsibility; financial crisis; social capital; trust
    JEL: G30
    Date: 2015–02
  4. By: Llanto, Gilberto M. ; del Prado, Fatima
    Abstract: Private firms invest in physical capital and human resource but they are also advised to invest in innovations to be more productive and profitable. Innovations refer to the development, deployment, and economic utilization of new products, processes, and services. It is important for firms to know whether investment in innovations is investment well-spent. Our empirical results provided an affirmative response to the question raised in this paper: "Does innovation mediate good firm performance?" Product and process innovations lead to increase in sales and profits and improve labor productivity. The paper also showed that firm size, age, and foreign equity are important factors leading firms to innovate.
    Keywords: innovation, Philippines, process innovation, product innovation, firm performance, small and medium enterprises (SMEs)
    Date: 2015
  5. By: Yi Wen (Federal Reserve Bank of St. Louis ); Leo Kaas (University of Konstanz ); Costas Azariadis (Washington University in St Louis )
    Abstract: In U.S. data 1981-2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is at best acyclical. In this paper we develop a tractable dynamic general equilibrium model in which unsecured firm credit arises from self-enforcing borrowing constraints preventing an efficient capital allocation among heterogeneous firms. Capital from less productive firms is lent to more productive ones in the form of credit secured by collateral and also as unsecured credit based on reputation which is a forward-looking variable. We argue that self-fulfilling beliefs over future credit conditions naturally generate endogenously persistent business cycle dynamics. A dynamic complementarity between current and future borrowing limits permits uncorrelated sunspot shocks to trigger persistent aggregate fluctuations in debt, factor productivity and output. We show that sunspot shocks are quantitatively important, accounting for a substantial part of the volatility in firm credit and output.
    Date: 2014
  6. By: Bandiera, Oriana ; Prat, Andrea ; Sadun, Raffaella
    Abstract: We develop a new survey instrument to codify CEOs’ diaries in large samples and use it to measure the labor supply of 1,114 family and professional CEOs of manufacturing firms across six countries (Brazil, France, Germany, India, the United Kingdom and the United States). By this measure, family CEOs work 9% fewer hours relative to professional CEOs, even when we control for a wide range of CEO, firm and industry characteristics. The differences in hours worked between family and professional CEOs are larger when the opportunity cost of leisure is lower. We interpret these results as evidence of differences in preferences for leisure across CEOs rather than optimal responses to organizational differences correlated with ownership. Differences in labor supply are larger in countries where inheritance laws favor wealth concentration and are correlated with differences in firm performance.
    Keywords: CEO; family firm; time use
    JEL: I23
    Date: 2015–02
  7. By: Benoît Mahy ; François Rycx ; Guillaume Vermeylen
    Abstract: The authors provide first evidence on whether the direct relationship between educational mismatch and firm productivity varies across working environments. Using detailed Belgian linked employer-employee panel data for 1999-2010, they find the existence of a significant, positive (negative) impact of over- (under-)education on firm productivity. Moreover, their results show that the effect of over-education on productivity is stronger among firms: (i) with a higher share of high-skilled jobs, (ii) belonging to high-tech/knowledge-intensive industries, and (iii) evolving in a more uncertain economic environment. Interaction effects between under-education and working environments are less clear-cut. However, economic uncertainty is systematically found to accentuate the detrimental effect of under-education on productivity.
    Keywords: Educational mismatch; productivity; linked employer-employee panel data; working environments
    JEL: J21 J24
    Date: 2015–02–25
  8. By: USHIJIMA Tatsuo
    Abstract: Because corporate diversification and organization co-evolve, diversification discounts, which are widely reported in the literature, can be caused by organizational structure, rather than by the industrial scope of the firm. The paper examines this possibility based on a large sample of Japanese firms for which the legal (parent-subsidiary) structure of the organization is easily observable. I identified a significant discount for diversified firms with and without control over the organizational structure. I also found that firms with a legally segmented structure (e.g., holding companies) are deeply discounted. My results suggest that both diversification and organization are important determinants of firm value.
  9. By: Valeria Gattai ; Giorgia Sali
    Abstract: This paper investigates the link between internationalization and performance in Europe. It takes a microeconomic perspective and studies how Foreign Direct Investment (FDI) experience relates with European firms’ economic, innovation and financial performance. Drawing on a large longitudinal database, our multinomial logit estimates suggest that FDI really matters. Indeed, firms experiencing some FDI (either inward, outward or both) enjoy a superior performance compared with purely domestic enterprises. Moreover, within the class of FDI players, firms engaged in inward and outward FDI turn out to be better than those engaged only in outward FDI, which are better than those engaged only in inward FDI. These results are robust to several performance measures and alternative specifications including firm, industry and country controls.
    Keywords: FDI, Heterogeneous firms, Europe
    JEL: F23 L25 O52
    Date: 2015–02
  10. By: Buchwald, Achim
    Abstract: This study contributes to the ongoing debate on the relevance of non-executive outside directors for corporate governance building on a large panel of European listed firms in the period 2003 to 2011. Focusing on executive turnover as an indicator for effective monitoring, the findings reveal that outside directors and product market competition are substitutes. Outsiders increase the performance-turnover sensitivity of executives exclusively if competition in the industry is relatively weak. In an environment with effective competition, outsiders do not significantly influence the decision to replace underperforming managers. In fiercely competitive markets, the higher threat of bankruptcy or hostile takeover seems to effectively limit managerial discretion for opportunistic behavior.
    Keywords: Competition,Corporate Governance,Executive Turnover,Outside Directors
    JEL: G34 J24 J63 L40 M00
    Date: 2015
  11. By: Mário Augusto (Faculty of Economics, University of Coimbra, Portugal ); Rui Pascoal (Faculty of Economics, University of Coimbra, Portugal ); Ana Margarida Monteiro (Faculty of Economics, University of Coimbra and GEMF, Portugal )
    Abstract: This study aims to describe the size distribution of Portuguese firms, as measured by annual sales and total assets, between 2006 and 2012, giving an economic interpretation for the evolution of the distribution along the time. Three distributions are fitted to data: the lognormal, the Pareto (and as a particular case Zipf) and the Simplified Canonical Law (SCL). We present the main arguments found in literature to justify the use of distributions, emphasizing the interpretation of SCL coefficients and its analogy with thermodynamics. Methods of estimation include Maximum Likelihood, modified Ordinary Least Squares in log-log scale and Nonlinear Least Squares considering the Levenberg-Marquardt algorithm. We apply these approaches to Portuguese firm data. In the sales case, the evolution of estimated parameters in both lognormal and SCL reflects the existence of a recession period more pronounced after 2008.
    Keywords: Firms size, lognormal law, Zipf's law, simplified canonical law, Shannon entropy.
    JEL: C11 C13 C44 C58 C63 C87 G11 G32
    Date: 2015–02
  12. By: Koki Oikawa ; Kozo Ueda
    Abstract: Money is not neutral if firm entry and exit are incorporated into a menu cost model. The real effect of money increases as a firm entry and exit rate increases, and the key is non-uniform firm distribution.
    Keywords: (non-)uniform distribution, menu cost
    JEL: E31 E52
    Date: 2015–01

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