nep-bec New Economics Papers
on Business Economics
Issue of 2015‒03‒22
sixteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Moderating Effect of Environmental Turbulence in the Relationship between Entrepreneurial Management and Firm Performance By Pratono, Aluisius Hery; Mahmood, Rosli
  2. CEO Duality and Firm Performance Revisited By Mohammadi, Ali; Basir, Nada O.; Lööf, Hans
  3. Technological Competencies and Firm Performance: Analyzing the Importance of Internal and External Competencies By Grillitsch, Markus; Nilsson, Magnus
  4. Women on the board and executive duration: Evidence for European listed firms By Buchwald, Achim; Hottenrott, Hanna
  5. Gender and Dynamic Agency: Theory and Evidence on the Compensation of Top Executives By Albanesi, Stefania; Olivetti, Claudia; Prados, Maria José
  6. A note on the link between firm size and exports By Hernández, Pedro J.
  7. Entry, Exit and the Shape of Aggregate Fluctuations in a General Equilibrium Model with Capital Heterogeneity By Julia Thomas; Berardino Palazzo; Aubhik Khan; Gian Luca Clementi
  8. Innovation Strategies and Firm Performance By Karlsson, Charlie; Tavassoli, Sam
  9. Educational Mismatch and Firm Productivity: Do Skills, Technology and Uncertainty Matter? By Mahy, Benoît; Rycx, Francois; Vermeylen, Guillaume
  10. Trade, Wages, and Collective Bargaining: Evidence from France By Carluccio, Juan; Fougère, Denis; Gautier, Erwan
  11. ’Make or Buy’ as Competitive Strategy: Evidence from the Spanish Local TV Industry By Christian Ruzzier; Ricard Gil
  12. Managerial Delegation and Aggregate Productivity By Jan Grobovsek
  13. Corporate governance, state ownership and cross-listing: Evidence from Chinese A-share listed firms By Xu, Hongmei
  14. Some Surprising Facts about Working Time Accounts and the Business Cycle By Balleer, Almut; Gehrke, Britta; Merkl, Christian
  15. Survival in Export Markets By Facundo Albornoz; Juan Carlos Hallak; Sebastián Fanelli
  16. Trade and Productivity: The Family Connection Redux By Klaus Prettner; Holger Strulik

  1. By: Pratono, Aluisius Hery; Mahmood, Rosli
    Abstract: Contingency theory points out the adaptive management is crucial point to sustainable firm performance. This research aims to determine the relative importance of a set of variables comprising the four entrepreneurial management variables, i.e. strategic orientation, organization culture, organization structure, and reward system, and a set of environmental turbulence variables in predicting firm performance. This research uses firm-level data with observed population of this research is SMEs in Surabaya, Indonesia. Through adopting hierarchical regression approach and partial least square method, this study indicates that moderating effect of environmental turbulence changes the direction of relationship between entrepreneurial management and firm performance. During low environmental turbulence, entrepreneurial management has positive impact on firm performance, but the direction changes. Entrepreneurial management has negative impact on firm performance during high environmental turbulence.
    Keywords: firm performance, entrepreneurial management, environmental turbulence
    JEL: M0 M00 M1 M12 M14 M2 M5 M52
    Date: 2014
  2. By: Mohammadi, Ali (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Basir, Nada O. (Faculty of Business and IT, University of Ontario Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper replicates and extends the empirical work of Boyd’s 1995 article: CEO Duality and Firm Performance: A Contingency Model. We retest Boyd’s hypotheses using a database of over 11,000 Swedish firms from the year 2005 to 2009. Similar to Boyd, we find that CEO duality is positively correlated to firm performance and the effect varies across environmental dimensions of munificence, dynamism and complexity. Using quantile regression, we also show that the positive impact of CEO duality increases by firm performance. Our findings hold after we control for potential endogeneity concerns.
    Keywords: CEO duality; boards of directors; agency theory; stewardship theory; replication
    JEL: G30 G34 L25
    Date: 2015–03–13
  3. By: Grillitsch, Markus; Nilsson, Magnus
    Abstract: In this paper, we analyze the relationship between technological competencies (TC) and firm performance. Theoretically, the importance of TC is well established and widely accepted. Therefore, it is surprising that a number of empirical studies have been unable to confirm a substantial positive relationship between TC and firm performance. We identify two major reasons for this: [i] affected by the availability and choice of indicators existing studies are often biased towards large firms; and [ii] they frequently do not consider both internal and potential access to firm-external TC. This paper discusses conceptually the interplay between firm-internal and firm-external TC as well as the mediating effect of firm size. These relationships are then analyzed empirically using Swedish micro data on 15,682 firms in 290 Swedish municipalities. Novel indicators based on occupational statistics are combined with measures of time-distance accessibility to study internal and external TC. The results provide evidence for a positive relationship between firm growth and TC. In particular, the combination of firm-internal and firm-external competencies seems to be conducive for growth. Lastly, our study suggests that firm size is an important factor to further our understanding about these relationships. Based on this we identify a number of future research questions to be addressed.
    Keywords: technological competencies, firm performance, accessibility, knowledge, innovation, geography, Agribusiness, Institutional and Behavioral Economics,
    Date: 2014–10
  4. By: Buchwald, Achim; Hottenrott, Hanna
    Abstract: The participation of women in top-level corporate boards (or rather the lack of it) is subject to intense public debate. Several countries are considering legally binding quotas to increase the share of women on boards. Indeed, research on board diversity suggests positive effects of gender diverse boards on corporate governance and even firm performance. The mechanism through which these benefits materialize remain however mostly speculative. We study boards of directors in a large sample of listed companies in 15 European countries over the period 2003-2011 and find that female representation on firms' non-executive boards is associated with reduced turnover and an increase in tenure of executive board members. An increase in the performance-turnover sensitivity of executives suggests that this effect may be explained by better monitoring practices rather than by less effective control or a "taste for continuity".
    Keywords: Corporate Governance,Executive Turnover,Gender,TMT Diversity
    JEL: G34 J24 J63 L25 M00
    Date: 2015
  5. By: Albanesi, Stefania; Olivetti, Claudia; Prados, Maria José
    Abstract: We document three new facts about gender differences in executive compensation. First, female executives receive lower share of incentive pay in total compensation relative to males. This difference accounts for 93% of the gender gap in total pay. Second, the compensation of female executives displays lower pay-performance sensitivity. A $1 million dollar increase in firm value generates a $17,150 increase in firm specific wealth for male executives and a $1,670 increase for females. Third, female executives' compensation is more sensitive to bad firm performance and less sensitive to good firm performance. We find no link between firm performance and the gender of top executives. We discuss evidence on differences in preferences and the cost of managerial effort by gender and examine the resulting predictions for the structure of compensation. We consider two paradigms for the pay-setting process, the efficient contracting model and the ``managerial power'' or skimming view. The efficient contracting model can explain the first two facts. Only the skimming view is consistent with the third fact. This suggests that the gender differentials in executive compensation may be inefficient.
    Keywords: gender differences in executive pay; incentive pay; pay-performance sensitivity
    JEL: G3 J31 J33
    Date: 2015–03
  6. By: Hernández, Pedro J. (Fundamentos del Análisis Económico)
    Abstract: This paper re-examines the link between firm size and exports in order to study the proposal that consists of increasing the firm size to raise exports as a way out of the current economic crisis. The elasticity of export propensity (percentage of exported sales) with respect to firm size depends on several firm characteristics. The new heories of international trade emphasize the firm heterogeneity as the theoretical basis of this behaviour. In the context of such heterogeneity, this paper uses the quantile regression methodology to analyze the effect of firm size on export propensity of the firms, confirming the existence of a positive relationship that becomes less important as export propensity increases. The traditional estimate of this elasticity on the average of the export propensities distribution underestimates the effect in the bottom of the distribution and overestimates the effect on most of it.
    Keywords: Firms size, export
    JEL: D12 R23
    Date: 2013–12
  7. By: Julia Thomas (The Ohio State University); Berardino Palazzo (Boston University, School of management); Aubhik Khan (Ohio State University); Gian Luca Clementi (Stern School of Business)
    Abstract: We study the cyclical implications of endogenous firm-level entry and exit decisions in a dynamic, stochastic general equilibrium model wherein firms face persistent shocks to both aggregate and individual productivity. The model we explore is in the spirit of Hopenhayn (1992). Firms' decisions regarding entry into production and their subsequent continuation are affected not only by their expected productivities, but also by the presence of convex and nonconvex capital adjustment costs, and thus their existing stocks. Thus, we can explore how age, size and selection reshape macroeconomic fluctuations in an equilibrium environment with realistic firm life-cycle dynamics and investment patterns. <P> Examining standard business cycle moments and impulse responses, we find that changes in entry and exit rates and the age-size composition of firms amplify responses over a typical business cycle driven by a disturbance to aggregate productivity and, to a lesser extent, protract them. Both results stem from an endogenous drag on TFP induced by a missing generation effect, whereby an usually small number of entrants fails to replace an increased number of exitors; this effect is most injurious several years out as the reduced cohorts of young firms approach maturity. Declines in the number of firms, and most notably in the numbers of young firms, were dramatic over the U.S. 2007-9 recession. In an exercise designed to emulate that unusual episode, we consider a second shock that more directly affects entry and the exit decisions of younger firms. We find that it sharpens the missing generation effect, delivering far more anemic recovery.
    Date: 2014
  8. By: Karlsson, Charlie (Centre of Excellence for Science and Innovation Studies (CESIS), Jönköping International Business School, & Blekinge Institute of Technology); Tavassoli, Sam (Blekinge Institute of Technology, Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE), & Lund University)
    Abstract: This paper analyzes the effect of various innovation strategies of firms on their future performance, captured by labour productivity. Using five waves of the Community Innovation Survey in Sweden, we have traced the innovative behaviour of firms over a decade, i.e. from 2002 to 2012. We distinguish between sixteen innovation strategies, which compose of Schumpeterian four types of innovations, i.e. process, product, marketing, and organizational (simple innovation strategies) plus various combinations of these four types (complex innovation strategies). The main findings indicate that those firms that choose and afford to have a complex innovation strategy are better off in terms of their future productivity in compare with both those firms that choose not to innovative (base group) and those firms that choose simple innovation strategies. Moreover, not all types of complex innovation strategies affect the future productivity significantly; rather, there are only few of them. This necessitates a purposeful choice of innovation strategy for firms.
    Keywords: Innovation Strategy; firm performance; productivity; firm level; Community Innovation Survey; Panel
    JEL: D22 L20 O31 O32
    Date: 2015–03–16
  9. By: Mahy, Benoît (University of Mons); Rycx, Francois (Free University of Brussels); Vermeylen, Guillaume (University of Mons)
    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
  10. By: Carluccio, Juan (Banque de France); Fougère, Denis (CREST); Gautier, Erwan (LEMNA - University of Nantes)
    Abstract: We estimate the impact of international trade on wages using data for French manufacturing firms. We instrument firm-level trade flows with firm-specific instrumental variables based on world demand and supply shocks. Both export and offshoring shocks have a positive effect on wages. Exports increase wages for all occupational categories while offshoring has heterogeneous effects. The impact of trade on wages varies across bargaining regimes. In firms with collective bargaining, the elasticity of wages with respect to exports and offshoring is higher than in firms with no collective bargaining. Wage gains associated with collective bargaining are similar across worker categories. Keywords: exports, offshoring, firm-level wages, collective bargaining.
    Keywords: exports, offshoring, firm-level wages, collective bargaining
    JEL: F16 J51 E24
    Date: 2015–02
  11. By: Christian Ruzzier (Department of Economics, Universidad de San Andres); Ricard Gil (Johns Hopkins Carey Business School)
    Abstract: This paper empirically investigates whether changes in product market competition affect firm boundaries. Exploiting regulation-induced shocks to entry barriers and differences in regulation enforcement across cities to obtain exogenous variation in competition, we establish a negative causal effect of competition (through reduced entry barriers and a larger number of rival firms) on vertical integration in the setting of the Spanish local television industry between 1995 and 2002.
    Keywords: competition, vertical integration, Spanish television
    JEL: D22 L22 L24 L82
    Date: 2015–02
  12. By: Jan Grobovsek (University of Edinburgh)
    Abstract: This paper proposes a novel mechanism to answer why firms in low income countries are badly managed, and quantifies the resulting productivity loss. First, I present empirical evidence on a significant positive correlation between the share of managerial workers and contract enforcement across countries. Second, I construct a tractable model that captures benefits to managerial delegation in large organizations. The model also features an agency problem between the owner of a firm and its middle management. Ineffective contract enforcement, allowing middle managers to steal from the firm, constrains firm size by limiting the efficient delegation of managerial authority. Third, I use a calibrated version of the model to measure the effect of lowering contract enforcement. Compared to the benchmark of US contract enforcement, no enforcement decreases the aggregate share of managerial workers by about 10 percentage points, typical of countries with income levels of about one-tenth of the US. The associated loss in aggregate labor productivity is roughly 18 percentage points. Auxiliary statistics on the mean firm size, self-employment and productivity dispersion offer additional empirical validation of these results.
    Date: 2014
  13. By: Xu, Hongmei
    Abstract: This paper analyses the relationship between corporate governance, state ownership and cross-listing by using data from 2,113 Chinese A-share listed firms during the period 2008 to 2013. Firstly, corporate governance features in state-owned vs. non-state-owned and cross-listed vs. domestically-listed firms are examinde. Secondly, this paper investigates whether state ownership and cross-listing affect the sensitivity of the relation between corporate governance and firm value in Chinese listed firms. The effects are rather mixed.
    Abstract: Der vorliegende Beitrag analysiert die Beziehung zwischen Corporate Governance, Staatseigentum und Zweitlisting anhand 2.113 chinesischer Firmen der Aktienklasse A in dem Zeitraum von 2008 bis 2013. Erstens werden Eigenschaften der Corporate Governance in staatlichen gegenüber nicht-staatlichen und doppelt gelisteten gegenüber nur inländisch gelisteten Unternehmen untersucht. Zweitens untersucht dieser Beitrag, ob Staatseigentum und Zweitlisting einen Einfluss auf die Beziehung von Corporate Governance und Unternehmenswert chinesischer Firmen haben. Die Effekte sind eher gemischt.
    JEL: G30 G34 M12 M50 P31
    Date: 2015
  14. By: Balleer, Almut (RWTH Aachen University); Gehrke, Britta (University of Erlangen-Nuremberg); Merkl, Christian (University of Erlangen-Nuremberg)
    Abstract: Working time accounts (WTAs) allow firms to smooth hours worked over time. This paper analyzes whether this increase in flexibility has also affected how firms adjust employment in Germany. Using a rich microeconomic dataset, we show that firms with WTAs show a similar separation and hiring behavior in response to revenue changes as firms without WTAs. One possible explanation is that firms without WTAs used short-time work instead to adjust hours worked. However, we find that firms with WTAs use short-time work more than firms without WTAs. These findings call into question the popular hypothesis that WTAs were the key driver of the unusually small increase in German unemployment in the Great Recession.
    Keywords: working time accounts, short-time work, business cycles
    JEL: E20 E24 J20 J30
    Date: 2015–02
  15. By: Facundo Albornoz (Department of Economics, Universidad de San Andres & CONICET); Juan Carlos Hallak (Department of Economics, Universidad de San Andres & CONICET); Sebastián Fanelli (MIT)
    Abstract: This paper explores the determinants of firm survival in export markets. Our theoretical framework includes a geometric Brownian motion for firm profitability, market-specific sunk and fixed exporting costs that are common across firms, and firm- and market-specific profitability shifters that are constant over time. We derive the probability of survival upon entry in an export market. We show that this probability increases with the ratio of sunk to fixed costs and is insensitive to the profitability shifters. Also, we show that the survival probability is unaffected by fixed costs if sunk costs are zero. Combining our theoretical results with observed patterns of survival among Argentine exporters, we infer the impact of distance and experience on the magnitude of sunk and fixed costs. In our data set, survival rates upon entry decrease with distance and increase with experience. Hence, we infer that fixed costs increase more with distance than sunk cost while fixed costs fall with experience sufficiently strongly to dominate the fall in sunk costs. These results carry implications on parametrizations of theoretical models of export dynamics and serve as a benchmark to assess structural estimates of fixed and sunk costs.
    Keywords: survival, export dynamics, fixed cost, sunk cost, productivity, firm heterogeneity, geometric Brownian motion
    JEL: F10 F12 F14
    Date: 2014–08
  16. By: Klaus Prettner; Holger Strulik
    Abstract: We investigate the effects of human capital accumulation on trade and productivity by integrating a micro-founded education and fertility decision of households into a model of international trade with firm heterogeneity. Our theoretical framework leads to two testable implications: i) the export share of a country increases with the education level of its population, ii) the average profitability of firms located in a country also increases with the education level of its population. We find that these implications are supported by empirical evidence for a panel of OECD countries from 1960 to 2010.
    Keywords: firm heterogeneity, international competiveness, education, fertility decline
    JEL: F12 F14 I20 J11
    Date: 2015–03

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