nep-bec New Economics Papers
on Business Economics
Issue of 2015‒04‒25
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Entrepreneurial Couples By Michael S. Dahl; Mirjam van Praag; Peter Thompson
  2. Production Networks, Geography and Firm Performance By Bernard, Andrew B.; Moxnes, Andreas; Saito, Yukiko U.
  3. Effectiveness of regulatory interventions on firm behavior: a randomized field experiment with e-commerce firms By Huizingh, Eelko; Mulder, Machiel
  4. 1On endogenous Stackelberg leadership: The case of horizontally differentiated duopoly and asymmetric net work compatibility effects By Tsuyoshi Toshimitsu
  5. Human capital, innovation and the distribution of firm growth rates By Goedhuys-Degelin M.D.L.; Sleuwaegen L.
  6. Allocation of Human Capital and Innovation at the Frontier: Firm-level Evidence on Germany and the Netherlands By Eric Bartelsman; Sabien Dobbelaere; Bettina Peters
  7. In Search of Creative Champions in High-Tech Spaces By Karima Kourtit; Peter Nijkamp
  8. Family Firms and Entrepreneurial Human Capital in the Process of Development By Maria Rosaria Carillo; Vincenzo Lombardo; Alberto Zazzaro
  9. High Performance in Complex Spatial Systems: A Self-Organizing Mapping Approach with Reference to The Netherlands By Karima Kourtit; Daniel Arribas-Bel; Peter Nijkamp
  10. Data Sparseness and Variance in Accounting Profitability By Spyridon Stavropoulos; Martijn J. Burger; Dimitris Skuras
  11. Task-specific Human Capital and Organizational Inertia By Josse Delfgaauw; Otto H. Swank
  12. The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry By Chia-Lin Chang; Hui-Kuang Hsu; Michael McAleer
  13. A Dynamic Agency Theory of Investment and Managerial Replacement By Hiroshi Osano; Keiichi Hori
  14. The influence of product liability on vertical product differentiation By Baumann, Florian; Friehe, Tim; Rasch, Alexander

  1. By: Michael S. Dahl (Aalborg University, Denmark); Mirjam van Praag (Copenhagen Business School, Denmark); Peter Thompson (Emory University, United States)
    Abstract: We study possible motivations for co-entrepenurial couples to start up a joint firm, using a sample of 1,069 Danish couples that established a joint enterprise between 2001 and 2010. We compare their pre-entry characteristics, firm performance and postdissolution private and financial outcomes with a selected set of comparable firms and couples. We find evidence that couples often establish a business together because one spouse – most commonly the female – has limited outside opportunities in the labor market. However, the financial benefits for each of the spouses, and especially the female, are larger in co-entrepreneurial firms, both during the life of the business and post-dissolution. The start-up of co-entrepreneurial firms seems therefore a sound investment in the human capital of both spouses as well as in the reduction of income inequality in the household. We find no evidence of non-pecuniary benefits or costs of coentrepreneurship
    Keywords: Entrepreneurship, motives, performance, couples, co-entrepreneurship.
    JEL: J12 L26
    Date: 2014–05–08
  2. By: Bernard, Andrew B.; Moxnes, Andreas; Saito, Yukiko U.
    Abstract: This paper examines the importance of buyer-supplier relationships, geography and the structure of the production network in firm performance. We develop a simple model where firms can outsource tasks and search for suppliers in different locations. Low search and outsourcing costs lead firms to search more and find better suppliers. This in turn drives down the firm's marginal production costs. We test the theory by exploiting the opening of a high-speed (Shinkansen) train line in Japan which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive dataset on firms' buyer-seller linkages, we find significant improvements in firm performance as well as creation of new buyer-seller links, consistent with the model.
    Keywords: firm-to-firm neworks; infrastructure; productivity; trade
    JEL: D22 D85 F14 L10 L14 R12
    Date: 2015–04
  3. By: Huizingh, Eelko; Mulder, Machiel (Groningen University)
    Abstract: Economic regulators use a number of instruments to change the behavior of economic agents, but only limited evidence exists on the effectiveness of such regulatory interventions. We conduct a randomized field experiment to determine the effects of two interventions aimed at e-commerce firms by a regulatory authority in order to let these firms meet legal obligations regarding information disclosure to protect consumer interests. We measure the compliance behavior of e-commerce firms in both a treatment group and a control group before and after two interventions. The first regulatory intervention concerns sending personalized letters to firms (firm-specific guidance), whereas the second intervention includes a number of dedicated publications and presentations by the regulatory authority (industry guidance). We find that both of these interventions have hardly any effect, neither in the short term nor in the long term. We conclude that regulatory interventions in the form of providing only guidance on the legal rules to firms are not effective strategies to influence their behavior.
    Date: 2014
  4. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: Introducing product compatibility associated with network externalities (hereafter, network compatibility effects) into a horizontally differentiated duopoly model, we consider how network compatibility effects and the level of product substitutability affect endogenous timing decisions in the cases of quantity- and price-setting competition. In particular, we demonstrate the following. First, given asymmetric network compatibility effects between the products of the firms, there is Stackelberg equilibrium where the firm providing a product with a larger network compatibility effect than some certain level of product substitutability emerges as a leader (follower), whereas the firm providing a product with a smaller network compatibility effect than some certain level of product substitutability emerges as a follower (leader) in the case of quantity (price)-setting competition. Second, the Stackelberg equilibrium is Pareto-superior for both firms compared with other equilibria. However, with alternative formulation determining network size, with respect to the endogenous Stackelberg leader−follower relationship, the revers holds.
    Keywords: Stackelberg equilibrium; Nash equilibrium; leader-follower; product compatibility; network externality; product substitutability; fulfilled expectations; horizontally differentiated products
    JEL: D21 D43 D62 L15
    Date: 2015–04
  5. By: Goedhuys-Degelin M.D.L.; Sleuwaegen L. (UNU-MERIT)
    Abstract: This paper focuses on the occurrence of high-growth firms in relation to human capital and innovation. High-growth firms are rather exceptional and temporary phenomena and occur in the upper tail of the conditional firm growth distribution. Using quantile regression we study how human capital and RD affect the probability that high-growth firms occur. The results show that both human capital and RD increase the likelihood that a firm is a high-growth firm. Human capital appears to be positive and growth enhancing over the entire conditional growth distribution, hence also in the lower quantiles, where it reduces the likelihood of low growth. By contrast, RD increases not only the likelihood of high-growth firms, but also the likelihood of low-growth firms and exits, underscoring the risky nature of innovation. A probit analysis for high-growth firms and low-growth firms provides corroborating evidence for this finding. From a policy perspective the results suggest the use of more integrated policies, not only focusing on stimulating RD but also on the quality of human capital to foster the development of high-growth firms.
    Keywords: Firm Performance: Size, Diversification, and Scope; Management of Technological Innovation and R&D;
    JEL: L25 O32
    Date: 2015
  6. By: Eric Bartelsman (VU University Amsterdam, The Netherlands, and IZA, Germany); Sabien Dobbelaere (VU University Amsterdam, The Netherlands, and IZA, Germany); Bettina Peters (Centre for European Economic Research (ZEW), MaCCI Mannheimer Centre for Competition and Innovation, Germany, and University of Zurich, Switzerland)
    Abstract: This paper examines how productivity effects of human capital and innovation vary at different points of the conditional productivity distribution. Our analysis draws upon two large unbalanced panels of 6,634 enterprises in Germany and 14,586 enterprises in the Netherlands over the period 2000-2008, considering 5 manufacturing and services industries that differ in the level of technological intensity. Industries in the Netherlands are characterized by a larger average proportion of high-skilled employees and industries in Germany by a more unequal distribution of human capital intensity. Except for low-technology manufacturing, average innovation performance is higher in all industries in Germany and the innovation performance distributions are more dispersed in the Netherlands. In both countries, we observe non-linearities in the productivity effects of investing in product innovation in the majority of industries. Frontier firms enjoy the highest returns to pro duct innovation whereas the most negative returns to process innovation are observed in the best-performing enterprises of most industries. In both countries, we find that the returns to human capital increase with proximity to the technological frontier in industries with a low level of technological intensity. Strikingly, a negative complementarity effect between human capital and proximity to the technological frontier is observed in knowledge-intensive services, which is most pronounced for the Netherlands. Suggestive evidence for the latter points to a winner-takes-all interpretation of this finding.
    Keywords: Human capital, innovation, productivity, quantile regression
    JEL: C10 I20 O14 O30
    Date: 2013–07–19
  7. By: Karima Kourtit (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam)
    Abstract: The business performance of firms in the creative high-tech sector shows much variation. This paper examines whether the geographical location of such business firms influences the performance of these firms. The overarching analysis framework of this paper emerges from the recently developed Strategic Performance Management (SPM) concept for individual firms, which in the present study is extended with spatial meso-attributes related to the location of these firms. SPM aims to improve the firms’ competitive performance through the application of strict internal management principles. Our study thus adopts a micro-business perspective on the organizational determinants of a firm’s economic performance and its links with distinct spatial entrepreneurship conditions and general economic moderator variables. The present study focuses on both large and small and medium-sized (SME) firms, mainly operating in the creative high-tech sector in the Netherlands. The research methodology uses stepwise the following analytical tools: multivariate analysis of an extensive micro- and meso-data set on the internal performance of firms and regional covariates; Data Envelopment Analysis (DEA) and its recent extension to super-efficient DEA for mapping out in a comparative way the achievements of both regions and firms; a GIS-oriented statistical analysis to identify geographically-discriminating factors in the firms’ performance; and the design and estimation of a Structural Equations Model (SEM) for assessing the performance of the firms concerned (using what is called the ‘flying disc’ model). Our results show significant differences in the performance of large vis-à-vis SME firms that have adopted SPM, while their geographical position in the country, in general, also plays a significant role.
    Keywords: creative industries, high-tech sector, Data Envelopment Analysis (DEA), super-efficient DEA, principal component analysis, Structural Equations Model, flying disc model
    JEL: M19 M21 Q5 Q56 R10 R11 R12 R15
    Date: 2013–12–09
  8. By: Maria Rosaria Carillo (University of Naples Parthenope); Vincenzo Lombardo (University of Naples Parthenope); Alberto Zazzaro (Polytechnic University of Marche, MoFiR and CSEF)
    Abstract: In this paper we present a new theory accounting for the heterogeneous impact of family firms on economic growth. We develop an overlapping generations model, where agents are heterogeneous in innate talent, and family firms have access to an additional source of managerial capital, family connections, which affects the incentives of the firms' owners to pass on the company within the family and invest in the entrepreneurial human capital of their heirs. Our theory predicts that family firms cluster into heterogeneous groups with different management practices, inducing, at the aggregate level, a misallocation of talent that affects economic growth and the evolution into either a dynamic or a stagnant society, depending on the productivity of family connections in doing business. This heterogeneity in management practices and entrepreneurial human capital explains the different contribution of family firms during industrialization, highlighting the many possible evolutionary patterns for the economy and long-run growth regimes. Consistent with the theory, we provide empirical evidence in favor of the importance of social connectivity among individuals for explaining the difference in management practices between family and non-family firms, and, in turn, the GDP per-capita across countries. JEL Classification: J24, J62, L26, O11, O40
    Keywords: Family firms, family connections, (mis)allocation of talents, technological change, economic growth
    Date: 2015–04–16
  9. By: Karima Kourtit (VU University Amsterdam); Daniel Arribas-Bel (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam)
    Abstract: This discussion paper resulted in an article in the <I>Annals of Regional Science</I> (2012). Volume 48, issue 2(SI), pages 501-527.<P> This paper addresses the performance of creative firms from the perspective of complex spatial systems. Based on an extensive high-dimensional database on both the attributes of individual creative firms in the Netherlands and a series of detailed regional facilitating and driving factors related, inter alia, to talent, innovation, skills, networks, accessibility and hardware, a new methodology called self-organizing mapping (SOM) is applied to identify and explain in virtual topological space, the relative differences between these firms and their business performance in various regions. It turns out that there are significant differences in the spatial and functional profile of large firms vis-à-vis SMEs across distinct geographical areas in the country.
    Keywords: complex spatial systems, self-organizing mapping, creative firms, talent, innovation, networks, accessibility, business performance, spatial and functional profiles, SMEs, large firms, geographical areas
    JEL: M1 Q5 R1 R10
    Date: 2013–12–09
  10. By: Spyridon Stavropoulos (University of Patras, Greece); Martijn J. Burger (Erasmus University Rotterdam, the Netherlands; University of Patras, Greece); Dimitris Skuras (University of Patras, Greece)
    Abstract: A central question in strategic management is why some firms perform better than others. One approach to addressing this question empirically is to decompose the variance in firm-level profitability into firm, industry, location, and year components. Although it is well established that data sparseness in variance decomposition studies can lead to overestimating particular variance components, little attention has been paid to sample size requirements in strategic management studies that have examined the nature of differences in firm profitability. We conduct a meta-regression and variance decomposition study and conclude that the variation in the results from previous studies is driven—to a considerable extent—by the number of observations per group within a component. Based on these findings, we draw conclusions regarding the validity and reliability of previo us variance decomposition studies and provide implications for current debates in the strategic management literature.
    Keywords: Firm profitability, variance decomposition, data sparseness, meta-analysis
    JEL: C18 L16 R11
    Date: 2015–01–26
  11. By: Josse Delfgaauw (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: Employees' incentive to invest in their task proficiency depends on the likelihood that they will execute the same tasks in the future. Changes in tasks can be warranted as a result of technological progress and changes in firm strategy as well as from fine-tuning job design and from monitoring individuals' performance. However, the possibility of a change in tasks reduces employees' incentive to invest in task-specific skills. We develop a simple two-period principal-agent model showing that some degree of inertia benefits the principal. We then analyze how organizations can optimally combine several policies to approach the optimal degree of inertia. In particular, we consider the optimal mixture of (abstaining from) exploration, managerial vision, organizational task-specific investments, and incentive pay. Our analysis yields testable predictions concerning the relations between these organizational policies.
    Keywords: Task-specific human capital, organizational inertia, time-inconsistency, exploration, exploitation
    JEL: D23 D83 D92
    Date: 2014–03–13
  12. By: Chia-Lin Chang (National Chung Hsing University, Taiwan); Hui-Kuang Hsu (National Pingtung Institute of Commerce, Taiwan); Michael McAleer (National Tsing Hua University, Hsinchu, Taiwan, Erasmus University Rotterdam, The Netherlands, and Complutense University of Madrid, Spain)
    Abstract: This discussion paper resulted in a publication in <I>The North American Journal of Economics and Finance</I> (2014). Volume 29(C), pages 381-401.<P> This paper investigates the stock returns and volatility size effects for firm performance in the Taiwan tourism industry, especially the impacts arising from the tourism policy reform that allowed mainland Chinese tourists to travel to Taiwan. Four conditional univariate GARCH models are used to estimate the volatility in the stock indexes for large and small firms in Taiwan. Daily data from 30 November 2001 to 27 February 2013 are used, which covers the period of Cross-Straits tension between China and Taiwan. The full sample period is divided into two subsamples, namely prior to and after the policy reform that encouraged Chinese tourists to Taiwan. The empirical findings confirm that there have been important changes in the volatility size effects for firm performance, regardless of firm size and estimation period. Furthermore, the risk premium reveals insignificant estimates in both time periods, while asymmetric effects are found to exist only for large firms after the policy reform. The empirical findings should be useful for financial managers and policy analysts as it provides insight into the magnitude of the volatility size effects for firm performance, how it can vary with firm size, the impacts arising from the industry policy reform, and how firm size is related to financial risk management strategy.
    Keywords: Tourism, firm size, stock returns, conditional volatility models, volatility size effects, asymmetry, tourism policy reform
    JEL: C22 G18 G28 G32 L83
    Date: 2013–08–16
  13. By: Hiroshi Osano (Institute of Economic Research, Kyoto University); Keiichi Hori (Faculty of Economics, Ritsumeikan University)
    Abstract: In this paper, we explore a dynamic theory of investment and costly managerial turnover given agency conflicts between the firm manager and investors. We incorporate the possibility of the successive replacement of managers until the firm is finally liquidated, and develop a continuous-time agency model with the q-theory of investment. We derive the dynamic variations of average q, marginal q, and the optimal investment?capital ratio surrounding manager turnover. Furthermore, we also indicate that the firm’s optimal replacement/ retention decision becomes more permissive with the frequency of the replacement of managers. Our theoretical findings yield empirical implications for the joint dynamics of investment and CEO turnover policy, which are consistent with evidence provided by the existing empirical literature, and provide novel testable hypotheses.
    Keywords: average q, CEO turnover, continuous-time agency model, investment, marginal q
    JEL: D86 D92 G31 G32 M12 M51
    Date: 2015–02
  14. By: Baumann, Florian; Friehe, Tim; Rasch, Alexander
    Abstract: This paper explores the impact of product liability on vertical product differentiation when product safety is perfectly observable. In a two-stage competition, duopolistic firms are subject to strict liability and segment the market such that a low-safety product is marketed at a low price to consumers with relatively small harm levels whereas the safer product is sold at a high price to consumers with high levels of harm. Firms' expected liability payments are critically influenced by how the market is segmented, creating a complex relationship between product liability and product differentiation. We vary the liability system's allocation of losses between firms and consumers. Shifting more losses to firms increases the safety levels of both products, but decreases the degree of product differentiation. Some shifting of losses is always socially beneficial, but the optimum may require that some compensable losses stay with the consumers.
    Keywords: product liability,accident,harm,imperfect competition,product safety,vertical product differentiation
    JEL: D43 K13 L13
    Date: 2015

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