nep-bec New Economics Papers
on Business Economics
Issue of 2015‒05‒02
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  2. Age and productivity as determinants of firm survival over the product life cycle By Silviano Esteve Pérez; Fabio Pieri; Diego Rodriguez
  3. Gender and corruption in business By Breen, Michael; Gillanders, Robert; McNulty, Gemma; Suzuki, Akisato
  4. Relative Earnings and Firm Performance: Evidence from Publicly-listed Firms in China, 2005-2012 By Peiwen Bai; Wenli Cheng
  5. Does Labour Mobility Foster Innovation? Evidence from Sweden By Braunerhjelm, Pontus; Ding, Ding; Thulin, Per
  6. Board Reforms and Firm Value: Worldwide Evidence By Xi Li; Mingyi Hung; Larry Fauver; Alvaro Taboada
  7. Strategic Dual Sourcing as a Driver for Free Revealing ofInnovation By Noriaki Matsushima; Laixun Zhao
  8. Determinants of Cross-border Mergers and Acquisitions: A Comprehensive Review and Future Direction By Reddy, Kotapati Srinivasa
  9. Culture of Trust and Division of Labor By Meier, Stephan; Stephenson, Matthew
  10. Market for Corporate Control and Contractual Buyout (CoBO): A New “Collective Ownership-and-Administrative” Strategy By Reddy, Kotapati Srinivasa
  11. Is innovation activity persistent among small firms in developing countries? Evidence from Vietnam By Trinh, Long
  12. No Lending Relationships and Liquidity Management of Small Businesses during a Financial Shock By TSURUTA Daisuke
  13. Learning by Export: Does the presence of foreign affiliate companies matter? By HOSONO Kaoru; MIYAKAWA Daisuke; TAKIZAWA Miho
  14. Mobility across Firms and Occupations among Graduates from Apprenticeship By Fitzenberger, Bernd; Licklederer, Stefanie; Zwiener, Hanna

  1. By: Lilia Cavallari (University of Roma Tre)
    Abstract: This paper studies the implications of entry costs for business formation in a dynamic stochastic general equilibrium model with endogenous entry and exit. The paper first documents some facts about business formation in the US. Exit is more volatile than entry, both are more volatile than output and co-move over the cycle. Firms are less volatile than output and procyclical. Then, it shows that a model with entry and exit can replicate these facts fairly well. In addition it captures important features of the US business cycle, outperforming models with a fixed exit rate and a fixed number of firms. The performance of the model is sensitive to changes in the composition of entry costs.
    Keywords: entry costs, firm entry, firm exit, business cycle, business creation, business destruction
    JEL: E31 E32 E52
    Date: 2014
  2. By: Silviano Esteve Pérez (Department of Applied Economics II, Universitat de València); Fabio Pieri (Department of Applied Economics, Universitat de València); Diego Rodriguez (Department of Applied Economics II, Universidad Complutense de Madrid)
    Abstract: This paper contributes to fill the gap between the literature on the determinants of firm survival and the theoretical and empirical works on the product life cycle (PLC). Using a representative sample of Spanish manufacturing firms with ten or more employees over the period 1991-2010, we empirically analyze the role played by firm age and productivity on firm survival across three different phases of the PLC to which firms are allocated according to firm- and product-level haracteristics. Firm age results to be negatively and significantly correlated with hazard rates mostly in the ‘young’ phase of the PLC, pointing out the role of ‘learning processes’ in this phase, while firm productivity is associated with lower hazard rates only in the ‘old’ phase of the PLC when market competition is primarily efficiency-driven. Our results qualify the roles of age and productivity as determinants of firm survival.
    Keywords: Product life cycle; firm survival; Spanish manufacturing firms; discrete time survival methods
    JEL: C41 L10 L60
    Date: 2015–04
  3. By: Breen, Michael; Gillanders, Robert; McNulty, Gemma; Suzuki, Akisato
    Abstract: Are women less corrupt in business? We revisit this question using firm-level data from the World Bank’s Enterprise Surveys, which measure firms’ experience of corruption and the gender of their owners and top managers. We find that women in positions of influence are associated with less corruption: female-owned businesses pay less in bribes and corruption is seen as less of an obstacle in companies where women are represented in top management. By providing evidence that women are, ethically at least, good for business our research contributes to the literature on development, gender equality, and corruption more generally.
    Keywords: corruption; bribery; gender; firm ownership; top management; corporate governance
    JEL: D73 G32 J16 M14
    Date: 2015–04
  4. By: Peiwen Bai; Wenli Cheng
    Abstract: This paper studies the relationship between three measures of relative earnings and firm performance based on data of 664 listed manufacturing companies in China over the period 2005-2012. It finds that (1) capital earnings relative to labor earnings and the overall average wage level relative to a firm’s average wage level had negative effects on firm performance; (2) the earnings of high-level managers relative to ordinary workers had a positive impact on firm performance; and (3) the effects of relative earnings on firm performance differed across regions, industry characteristics, and firm ownership structures, and over different time periods.
    Keywords: relative income share of capital and labor, relative earnings of management and workers, relative wage, firm performance in China
    JEL: D24 J31
    Date: 2014–11
  5. By: Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Ding, Ding (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Thulin, Per (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: By utilising a Swedish unique, matched employer-employee dataset that has been pooled with firm-level patent application data, we provide new evidence that knowledge workers’ mobility has a positive and strongly significant impact on firm innovation output, as measured by firm patent applications. The effect is particularly strong for knowledge workers that have previously worked in a patenting firm (the learning-by-hiring effect), but firms losing a knowledge worker are also shown to benefit (the diaspora effect), albeit more weakly. Finally, the effect is more pronounced when the joining worker originates in another region.
    Keywords: Labour mobility; knowledge diffusion; innovation; social networks
    JEL: J24 O31 R23
    Date: 2015–04–24
  6. By: Xi Li (Department of Accounting, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Mingyi Hung (Department of Accounting, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Larry Fauver (Department of Accounting, University of Tennessee); Alvaro Taboada (Department of Accounting, University of Tennessee)
    Abstract: We examine the impact of corporate board reforms on firm value in 41 countries. Using a difference-in-differences design, we find that firm value increases after enactment of the reforms. The valuation increase is associated with both the intensity and major components of the reform, including board independence, audit committee, and the separation of the roles of chief executive officer and chairman. We also find that the effect of these reforms primarily exists in countries with weak legal institutions. In addition, the effect of reforms is concentrated among comply-or-explain reforms, and the role of country-level institutions is less important for these reforms than for regulation reforms. Taken together, our findings suggest exogenously introduced governance changes benefit shareholders, mainly in countries with weak institutional quality and for reforms with a comply-or-explain approach.
    Keywords: cross-country study, firm value, governance reforms
    JEL: G15 G34 K22
    Date: 2015–03
  7. By: Noriaki Matsushima (Institute of Social and Economic Research, Osaka University); Laixun Zhao (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: This paper examines the role of dual sourcing (e.g., outside options) in vertical and horizontal relations. In a bilateral monopoly market, if either the upstream or downstream firm has outside options, the other firm could lose from seemingly positive shocks, e.g., market expansion or technology improvements. We extend this setting to a bilateral duopoly market in which each downstream firm has outside options and upstream firms can engage in cost reducing investments and generate technological spillovers. We find that each upstream firm has an incentive to voluntarily generate technological spillovers to its upstream rival if the downstream firms have better outside options.
    Keywords: Dual sourcing, Outside option, Spillover, Vertical relations
    JEL: L13 O32 M11 C72
    Date: 2015–04
  8. By: Reddy, Kotapati Srinivasa
    Abstract: The purpose of this paper is to review and summarize earlier studies analyzing the determinants of cross-border mergers and acquisitions (M&As). We primarily describe the motives of cross-border acquisitions and present the market performance for corporate control transactions over the period 1994-2013. Then, we illustrate the factors affecting cross-border investments and acquisitions in various taxonomies, namely deal-specific factors, firm- and industry-specific attributes, organizational learning and prior-acquisition experience, and country-specific factors. We draw special attention to the country-specific taxonomy for various reasons include economic and financial markets environment, institutional and regulatory framework, political situation (including corruption), tax system, accounting and valuation matters, geographical factors and cultural issues. We also provide a synopsis of earlier studies addressing the diversification motive in M&A decision. We thus propose that a host-country’s institutional laws and regulatory system, accounting and tax provisions, economic performance, financial markets development, investor protection, geographical, political and cultural factors distinctly affect cross-border acquisition’s completion. Lastly, we outline contemporary issues in M&A research, and suggest promising areas for future exploration.
    Keywords: Literature review; Cross-border mergers and acquisitions; Internationalization; Foreign market entry strategies; International diversification; Foreign direct investment; International business research
    JEL: E6 F2 F23 F4 G3 G34 G38 K2 L2 M1 M16
    Date: 2015
  9. By: Meier, Stephan (Columbia University); Stephenson, Matthew (Columbia University)
    Abstract: Firms exhibit heterogeneity in size, productivity, and internal structure, and this is true even within the same industry. It has been thought since the time of Adam Smith that a firm's internal structure affects its productivity through the channel of gains from specialization. Our paper provides evidence of a link between an organization's culture – specifically the trust environment – and its internal structure. We show experimentally that exogenously imposed culture endogenously leads to variation in organizational form. We prime trust using past performance from a pilot study and demonstrate that the level of trust within an organization affects division of labor and consequently organizational productivity. This evidence is consistent with a cross-country link between trust and the division of labor that we observe in data from the European Social Survey. Our results point to a mechanism that can help explain existing results on the connection between generalized trust and growth. It also points to an important determinant of a firm's internal structure: corporate culture (of trust).
    Keywords: trust, division of labor, organizational structure
    JEL: C90 D20 D03
    Date: 2015–04
  10. By: Reddy, Kotapati Srinivasa
    Abstract: Contractual buyout (CoBO) is a new “collective ownership and joint administrative strategy”, which gives an opportunity to buy a target firm in the given period when the given contract ends between acquirer, target firm, and financier. It is a takeover defensive method and tends to avail tax advantage via entering CoBO deal. In particular, it would be efficient inorganic magnetic for international venture capitalists and private equity firms while entering foreign markets. More specifically, CoBO is likely a concept of Dating-before-Merging and it would be the better model for cross-border mergers and acquisitions integration strategy. The explored CoBO propositions may be useful in various implications such as information symmetry and administrative changes, employment and employee role, operating performance and financial arrangement, tax savings, choice of market entry strategy, integration strategy, and government and policy makers. We recommend the developed country investors choose CoBO as investment vehicle to avail the competent business opportunities in both emerging and budding economies.
    Keywords: Contractual buyout; Collective ownership; Inorganic strategy; Leveraged buyout; Market for corporate control; Mergers and acquisitions; Strategic alliances, Takeovers
    JEL: F2 F21 F23 F4 L1 L2 L5 M1 M16
    Date: 2015
  11. By: Trinh, Long
    Abstract: Using firm-level panel data collected in Vietnam bi-annually from 2005 to 2013, this paper examines whether innovation is persistent among small firms in Vietnam. The empirical results obtained from dynamic random effect probit and dynamic random effect ordered probit show that the innovation activity is persistent among these small firms. Our estimation results also show slightly different roles of human capital of firm’s owner and employees in innovation activities. While the owner’s human capital is associated with creating a new product, employees’ human capital is positively correlated with upgrading the existing products or production procedure. However, we do not find evidence on the roles of unobserved heterogeneity in explaining this persistence. Our results are consistent with results found in the literature for firms in developed economies.
    Keywords: Innovation, Persistence of Innovation, Unobserved heterogeneity, Dynamic Random Effect Probit Model, Dynamic Random Effect Ordered Probit Model, Small and Medium Enterprises, Vietnam
    JEL: C23 C25 L20 O31 O33
    Date: 2015–04–14
  12. By: TSURUTA Daisuke
    Abstract: We investigate the determinants of the end of lending relationships with banks using small business data. We also investigate how small businesses without lending relationships financed credit demand during the global financial shock. First, we find that firms with high internal cash holdings, lower growth, and low working capital were more likely to end lending relationships with banks. Supply-side effects on the determinants of the end of relationships are insignificant. Second, when firms experienced credit demand during the financial shock, those with lending relationships increased bank borrowings while those without lending relationships reduced internal cash. However, if we examine cash-rich firms, both firms with and without relationships reduced cash holdings to finance working capital during the shock period. Third, firm performance (in terms of profitability) was neither lower nor higher for firms that did not have lending relationships with banks during the shock period.
    Date: 2015–04
  13. By: HOSONO Kaoru; MIYAKAWA Daisuke; TAKIZAWA Miho
    Abstract: This paper investigates the effect of export activities on firm performance by taking into account whether or not exporter firms' affiliated companies (i.e., their own subsidiaries and parent companies' branches) are located in the export markets. To single out a causal impact on firm performance running from starting export, we employ propensity-score matching difference-in-differences estimation. Using a unique firm-level panel dataset that allows us to identify firms starting export and firms staying in domestic markets as well as their affiliated firms' overseas activities, we find that firms exhibited better performance than their non-exporter counterparts prior to export, and that the difference in the performance, especially productivity, significantly widened after export. Such improvement in productivity originated from starting export was found to be statistically and economically significant when exporter firms did not have affiliated firms in overseas markets. On the other hand, the performance gain from export was highly heterogeneous and hence statistically insignificant in the case when these affiliated firms were present in overseas market. The former type of firm fits well to test the learning-by-exporting mechanism hypothesis since it accessed the export markets for the first time by exporting.
    Date: 2015–04
  14. By: Fitzenberger, Bernd (Humboldt University Berlin); Licklederer, Stefanie (University of Freiburg); Zwiener, Hanna (Humboldt University Berlin)
    Abstract: Distinguishing carefully between mobility across firms and across occupations, this study provides causal estimates of the wage effects of mobility among graduates from apprenticeship in Germany. Our instrumental variables approach exploits variation in regional labor market characteristics. Pure firm changes and occupation-and-job changes after graduation from apprenticeship result in average wage losses, whereas an occupation change within the training firm results in persistent wage gains. For the majority of cases a change of occupation involves a career progression. In contrast, for job switches the wage loss dominates.
    Keywords: apprenticeship training, job mobility, occupational mobility, wages
    JEL: J62 J24 J30 J31
    Date: 2015–04

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