nep-bec New Economics Papers
on Business Economics
Issue of 2015‒06‒27
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Price and quantity competition in a differentiated duopoly with network compatibility effects By Tsuyoshi Toshimitsu
  2. Empirical Evidence from Canadian Firm-level Data on the Relationship Between Trade and Productivity Performance By Baldwin, John R.; Yan, Beiling
  3. Appropriability Mechanisms, Innovation and Productivity:Evidence from the UK By Hall, Bronwyn H.; Sena, Vania
  4. Exploring the link between innovation capability and financial performance By Salih Ye; Ahmet Kaya
  5. The Structure of Corporate Holdings and Corporate Governance: Evidence from India By Swarnodeep Homroy; Shantanu Banerjee
  6. On the efficiency of Bertrand and Cournot equilibrium in the presence of asymmetric network compatibility effects By Tsuyoshi Toshimitsu
  7. Micro-Evidence on Product and Labor Market Regime Differences between Chile and France By Dobbelaere, Sabien; Lauterbach, Rodolfo; Mairesse, Jacques
  8. Deviating from the benchmarks: Human capital inputs and the survival of new startups By Vera Rocha; Mirjam van Praag; Anabela Carneiro
  9. Strategic Incentives When Supplying to Rivals By Serge Moresi; Marius Schwartz
  10. Trade Liberalization, Rival Exporters and Reallocation of Production: An Analysis of Indian Manufacturing By Lawrence Edwards and Asha Sundaram
  11. Exchange rate fluctuations and the margins of exports By Richard Fabling; Lynda Sanderson
  12. Does the gender mix among employers influence who gets hired? A labor market experiment By Alexia Gaudeul; Ayu Okvitawanli; Marian Panganiban
  13. Recruitment and Selection in Organizations By Alonso, Ricardo
  14. Product standards and firms? export decisions By Fernandes,Ana Margarida; Ferro,Esteban; Wilson,John Martin

  1. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: We consider endogenous choice of the strategic variables, price and quantity, in a horizontally differentiated duopoly market, assuming network effects and product compatibility (hereafter, network compatibility effects). We demonstrate the following. If the degree of network compatibility effects of the other rival firm is smaller (larger) than the degree of product substitutability, then choosing quantity (price) is a dominant strategy for the firm. In this case, the Cournot (Bertrand) equilibrium arises. If there are asymmetric network compatibility effects between the firms, the firm with larger (smaller) network compatibility effects than the degree of product substitutability chooses quantity (price). In this case, the Cournot−Bertrand equilibrium arises.
    Keywords: Bertrand equilibrium; Cournot equilibrium; Cournot−Bertrand equilibrium; product compatibility; network effect; fulfilled expectation; horizontally differentiated duopoly
    JEL: C72 D01 D43 L13
    Date: 2015–06
  2. By: Baldwin, John R.; Yan, Beiling
    Abstract: Canada?s aggregate productivity performance has closely tracked changes in Canada?s trading environment. To gain a better understanding of the link, the Economic Analysis Division of Statistics Canada has conducted a set of studies that investigate whether and how changes in the trading environment, brought about by trade liberalization policies and exchange-rate movements, contributed to productivity growth. The firm-level analysis provides insights into the productivity dynamics that arise from within-industry growth and restructuring as resources are shifted from declining to growing industries. The paper provides an overview of the key Canadian empirical findings over the last two decades.
    Keywords: Business performance and ownership, Economic accounts, International trade, Manufacturing
    Date: 2015–06–16
  3. By: Hall, Bronwyn H. (University of California at Berkeley and University of Maastricht; NBER, IFS London, and NIESR); Sena, Vania (Essex Business School, University of Essex)
    Abstract: We use an extended version of the wellestablished Crepon, Duguet and Mairesse model (1998) to model the relationship between appropriability mechanisms, innovation and firmlevel productivity. We enrich this model in several ways. First, we consider different types of innovation spending and study the differences in estimates when innovation spending (rather than R&D spending) is used to predict innovation in the CDM model. Second, we assume that a firm simultaneously innovates and chooses among different appropriability methods (formal or informal) to protect the innovation. Finally, in the third stage, we estimate the impact of the innovation output conditional on the choice of appropriability mechanisms on firms’ productivity. We find that firms that innovate and rate formal methods for the protection of Intellectual Property (IP) highly are more productive than other firms, but that the same does not hold in the case of informal methods for the protection of a firm’s IP, except possibly for large firms as supposed to SMEs. We also find that this result is strongest for firms in the services, trade, and utility sectors, and negative in the manufacturing sector.
    Keywords: productivity; innovation; intellectual property; appropriability; patents; CDM
    JEL: L25 O30 O34
    Date: 2015–06–18
  4. By: Salih Ye (Kaahmramanmara); Ahmet Kaya (Akdeniz Un,versty)
    Abstract: Today’s global and uncertain business world transform the way business is conducted. Companies need to pay attention to the innovation and innovation capabilities for the survival, success and growth. Innovation provides several strategic advantages (e.g., better performance outcomes, efficiency, productivity and competitive advantages) to all types of organisations. This study focuses on innovation capability and explores its effect on firm financial performance. The hypothesis is drawn from existent related literature. Data is collected from fifty four SMEs operating in Gaziantep city of Turkey and tested through correlation and regression analyses. The results reveal that innovation capability is positively related to sales growth but not to the return on assets. The findings and implications are discussed in relation to theory and previous empirical studies.
    Keywords: Innovation, Innovation Capability, Performance, Financial Performance, SMEs
    JEL: O31 L25 M10
    Date: 2015–06
  5. By: Swarnodeep Homroy; Shantanu Banerjee
    Abstract: This paper examines how the structure of corporate holdings impacts upon the corporate governance mechanisms and outcomes. Using a panel data of 500 large listed Indian …firms we compare …firms with dispersed equity ownership, and business group …firms with cross-holdings and concentrated family ownership, within the same institutional frameworks. Contrary to the popular hypothesis that concentrated shareholding leads to worse corporate governance outcomes, we find that the corporate governance outcomes are similar for both types of …firms, even though the incentive alignment mechanisms may be different. The results of this paper suggest that corporate holding structures and governance mechanisms adjusts to optimize value and performance.
    Keywords: business groups, corporate governance, concentrated share ownership, corporate holding structure
    JEL: G15 G28 G32
    Date: 2015
  6. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: Based on a differentiated duopoly model, we consider the efficiency of Bertrand and Cournot equilibrium in the presence of network effects and product compatibility. In particular, we demonstrate that if an asymmetric product compatibility with a strong network effect between the firms arises, give certain conditions, Cournot equilibrium is more efficient than Bertrand equilibrium in terms of greater consumer, producer, and social surplus.
    Keywords: Bertrand equilibrium; Cournot equilibrium; product compatibility; network effect; fulfilled expectation; horizontally differentiated duopoly
    JEL: L13 L32 L33
    Date: 2015–06
  7. By: Dobbelaere, Sabien (VU University Amsterdam); Lauterbach, Rodolfo (Maastricht University); Mairesse, Jacques (CREST-INSEE)
    Abstract: Institutions, social norms and the nature of industrial relations vary greatly between Latin American and Western European countries. Such institutional and organizational differences might shape firms' operational environment in general and the type of competition in product and labor markets in particular. Contributing to the literature on estimating simultaneously product and labor market imperfections, this paper quantifies industry differences in both types of imperfections using firm-level data in Chile –a non-OECD member under the considered time period– and France. We rely on two extensions of Hall's econometric framework for estimating price-cost margins by nesting three labor market settings (perfect competition or right-to-manage bargaining, efficient bargaining and monopsony). Using an unbalanced panel of 1,737 firms over the period 1996-2003 in Chile containing unique data on firm-level output price indices and 14,270 firms over the period 1994-2001 in France, we first classify 20 comparable manufacturing industries in 6 distinct regimes that differ in the type of competition prevailing in product and labor markets. We then investigate industry differences in the estimated product and labor market imperfections. Consistent with differences in institutions and in the industrial relations system in the two countries, we find important regime differences across the two countries. In addition, we observe cross-country differences in the levels of product and labor market imperfections within regimes.
    Keywords: rent sharing, monopsony, price-cost mark-ups, production function, panel data
    JEL: C23 D21 J51 L13
    Date: 2015–06
  8. By: Vera Rocha (Copenhagen Business School – INO); Mirjam van Praag (Copenhagen Business School – INO); Anabela Carneiro (Universidade do Porto – cef.up)
    Abstract: This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders' human capital, and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.
    Keywords: Keywords: human resources, human capital, startup conditions, new ventures, firm survival, entrepreneurs, intra-industry dynamics
    Date: 2015–06
  9. By: Serge Moresi (Charles River Associates, Inc., Washington DC); Marius Schwartz (Department of Economics, Georgetown University)
    Abstract: We consider an unregulated, vertically integrated input monopolist that supplies to a differentiated downstream rival. With linear input pricing, the integrated firm unambiguously wants to induce expansion by the rivalÑthe opposite incentive from that in standard oligopoly settings with no supply relationship, even though the downstream competition effect is still present here. This result holds whether downstream competition involves prices or quantities and strategic substitutes or complements. If the firm charges a two-part tariff for the input, the result continues to hold under Bertrand competition in the ÒnormalÓ case of prices as strategic complements, but is reversed for Cournot and strategic substitutes. We analyze one mechanism for influencing the independent downstream firm, vertical delegation, whereby the integrated firm charges its downstream unit an observable input price, and the downstream unit does not treat that price as a pure internal transfer. Vertical delegation is shown to dominate centralized behavior by the integrated firm, and we characterize how the input price should be set in order to alter the independent firmÕs choice depending on the specifics of downstream competition.
    Keywords: Strategic Competition Against Customers, Vertical Delegation
    JEL: L13 D43 L14 L22
  10. By: Lawrence Edwards and Asha Sundaram
    Abstract: Employing a difference-in-difference estimation technique on firm-level data on Indian exporters, we show that the removal of US textile and apparel quotas was associated with a relative increase in sales of products where India was previously quota-restricted, but a relative decrease in sales of products where China was previously quota-restricted. We hence highlight the importance of accounting for falling trade barriers for rival exporters in analyzing trade liberalization effects. Additionally, we find that previously more productive firms see a greater increase in sales, suggesting potential gains from reallocation in an environment where quota rights were not allocated efficiently.
    Keywords: Import Quotas, Firm behavior, India, Chinese competition
    JEL: F10 F13 L11 O14 O24
    Date: 2015
  11. By: Richard Fabling; Lynda Sanderson (The Treasury)
    Abstract: This paper examines the relationship between exchange rate fluctuations and New Zealand export performance. To isolate the impact of the exchange rate, as opposed to contemporaneous (and related) fluctuations in New Zealand’s economic performance or overseas market characteristics, we focus on bilateral export relationships at the firm level and control for both time-invariant country characteristics and changes in aggregate economic conditions. We examine two key margins of export adjustment – the probability of exporting (the extensive margin) and the average value of exports per firm (the intensive margin) – and distinguish between impacts on market incumbents and new or potential entrants. Finally, we specifically take account of the potential for interaction between the level and volatility of the exchange rate to affect exporting, as implied by theories of exchange rate hysteresis.
    JEL: D22 F14 F31
    Date: 2015–06
  12. By: Alexia Gaudeul (Friedrich-Schiller-Universität, Jena); Ayu Okvitawanli (Friedrich-Schiller-Universität, Jena); Marian Panganiban (Friedrich-Schiller-Universität, Jena, and Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We consider in this paper whether the gender mix at the level of decision-makers in firms can influence gender representation at the employee level. We run a laboratory experiment whereby we present a pair of independent employers with applications from two potential employees. We consider whether the gender of the other employer will influence an employer's hiring decision. We find that the gender mix among employers plays a role in the individual hiring decisions of female members. Female employers when paired with a male employer are more likely to choose a female applicant over an equally competent male applicant. Results of an Implicit Association Test (IAT) and answers to a post-experimental questionnaire show that explicit beliefs about relative gender performance are significantly associated with the observed hiring bias, while implicit attitudes do not appear to play a role.
    Keywords: discrimination, hiring, IAT, implicit attitudes, gender quotas, labor markets, employment
    JEL: J71 J78 C91
    Date: 2015–06–18
  13. By: Alonso, Ricardo
    Abstract: This paper studies employer recruitment and selection of job applicants when productivity is match-specific. Job seekers have private, noisy estimates of match value, while the firm performs noisy interviews. Job seekers' willingness to incur the application costs varies with the perceived hiring probability, while the firm considers the applicant pool's composition when setting hiring standards. I show that changes in the accuracy of job seekers' estimates, or the firm's interview, affect application decisions, and both can raise hiring costs when they discourage applications. Thus, the firm may favor noisier interviews or prefer to face applicants that are less informed of their person-organization fit.
    Keywords: employer search; hiring; recruitment; selection
    JEL: D21 D82 L23 M12 M51
    Date: 2015–06
  14. By: Fernandes,Ana Margarida; Ferro,Esteban; Wilson,John Martin
    Abstract: The paper estimates the effect of product standards on firms? export decisions using two novel datasets. The first covers all exporting firms in 42 developing countries. The second covers pesticide standards for 243 agricultural and food products in 63 importing countries over 2006?12. The analysis shows that product standards significantly affect foreign market access. More restrictive standards in the importing country, relative to the exporting country, lower firms? probability of exporting as well as their export values and quantities. The relative restrictiveness of standards also deters exporting firms from entering new markets and leads to higher exit rates from those markets. Moreover, firm characteristics mediate the effect of product standards on firms? export decisions. Smaller exporters are more negatively affected in their market entry and exit decisions by the relative stringency of standards than larger exporters. Positive network effects of exporters from the same country may help reduce the burden of importing countries? standards on firms? decisions to enter new markets.
    Keywords: Science Education,Microfinance,Labor Policies,Markets and Market Access,Information and Communication Technologies
    Date: 2015–06–18

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