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on Business Economics |
| By: | Pull, Kerstin; Stadler, Manfred |
| Abstract: | We study product market competition between firm owners (principals) where workers (agents) decide on their efforts and, hence, on output levels. Two worker compensation schemes are compared: a piece rate compensation as a benchmark when workers' output performance is verifiable, and a contest-based compensation scheme with variable, revenue-based prizes when it is only verifiable who the best performing worker is, i.e., only 'contest performance' is verifiable.Without rivalry between firms, the two compensation schemes lead to the same results. In case of product market competition, however, contest-based compensation schemes lead to more employment, more production, and lower firm profits. The reduction in profits represents the cost of being only able to verify workers' contest performance instead of output performance. |
| Keywords: | worker compensation,piece rates,team contests,revenue sharing,strategic competition |
| JEL: | C72 L22 M52 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:85&r=bec |
| By: | Da Rocha Alvarez, Jose Maria; Sempere, Jaume |
| Abstract: | Concerns over the distributive effects of ITQ’s lead to restrictions on their tradability. We consider a general equilibrium model with firm dynamics. In contrast with the standard framework, the distribution of firms is not exogenous, but is instead determined endogenously by entry/exit decisions made by firms. We show that the stationary wealth distribution depends on whether the ITQs are fully tradable or not. We calibrate our model to match the observed increase in revenue inequality in the Northeast Multispecies (ground-fish) U.S. Fishery. We show that although observed revenue inequality increases, wealth inequality is reduced by 40%. |
| Keywords: | ITQ, wealth distribution, firm dynamics, inequality, permit markets |
| JEL: | D6 Q58 |
| Date: | 2015–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66083&r=bec |
| By: | Lionel Fontagné; Gianluca Santoni |
| Abstract: | A large portion of productivity differentials among locations is related to density. Firms located in denser areas are more productive due to agglomeration economies (Combes et al., 2012). We provide in this paper an explanation of such economies: lower input misallocation. The distribution of resources among heterogeneous firms has relevant consequences on allocative efficiency and denser areas provide a more favorable environment for dynamic matching between employers and employees. Using a methodology proposed by Petrin and Sivadasan (2013) we are able to assess the degree of resource misallocation among firms within sectors for each of the 96 French "Départements". Based on firm-level productivity estimates, we identify in the gap between the value of the marginal product and marginal input price the output loss due to inefficiencies in inputs allocation. Over the period 1993- 2007 the average gap at firm level is around 10 thousands euro, showing a relevant increase starting from the early 2000s. Importantly, firms misallocations are lower in denser areas, suggesting that the matching mechanism is playing a role in explaining the productivity premium of agglomerated locations. |
| Keywords: | Misallocation;Productivity;Firm Level Data |
| JEL: | D24 L25 O47 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2015-12&r=bec |
| By: | Bryan Hong (Ivey Business School, Western University); Dylan Minor (Harvard Business School, Strategy Unit) |
| Abstract: | We investigate the relationship between a manager's influence on firm financial and social performance. To examine the mechanism governing the relationship between a manager's investment decisions along both dimensions of performance, we use a formal agency theory model to develop testable implications. In our empirical results, we find that a manager's influence on firm CSR activities is negatively related to their influence on financial performance. Also, as suggested by the implications of the model, we find that managers who operate in industries with more volatile financial performance and receive a lower share of compensation from incentive-based pay are more likely to have a positive influence on firm social performance. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:16-011&r=bec |
| By: | Kai Li (HKUST); Fang Yang (Louisiana State University); Hengjie Ai (University of Minnesota) |
| Abstract: | We develop a general equilibrium framework to quantify the importance of intermediated capital reallocation in affecting macroeconomic fluctuations and asset returns. In our model, financial intermediaries intermediate capital reallocation between low productivity firms with excess capital and high productivity firms who need credit. Because lending contracts cannot be perfectly enforced, capital misallocation lowers aggregate productivity when intermediaries are financially constrained. As a result, shocks originated from the financial sector manifest themselves as fluctuations in total factor productivity and account for most of the business cycle variations in macroeconomic quantities. Our model produces a pro-cyclical capital reallocation and is consistent with the stylized fact that the volatilities of productivity are counter-cyclical at both the firm and the aggregate level. On the asset pricing side, our model matches well moments of interest rate spreads in the data and successfully generates a high and counter-cyclical equity premium. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:429&r=bec |
| By: | Wagner, Joachim (Leuphana University Lueneburg, Germany, Centre of Excellence for Science and Innovation Studies (CESIS), & Royal Institute of Technology (KTH), Sweden.) |
| Abstract: | Crinò and Epifani (2012) report and discuss two empirical regularities they find in a representative sample of Italian manufacturing firms. First, there is a negative correlation between firms’ productivity and their export share to low-income destinations. Second, there is a negative correlation between firms’ innovation activity and their export share to low-income destinations. This note uses recently available comparable high quality firm level data for six European countries (including Italy) and similarly specified empirical models in an attempt to replicate these results. Replication failed completely. The link found between the share of exports to low-income countries and either productivity or R&D intensity is never in line with the results from Crinò and Epifani (2012). |
| Keywords: | exports; low-income destinations; productivity; innovation; EFIGE data |
| JEL: | F14 |
| Date: | 2015–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0417&r=bec |
| By: | Tengying Weng; Tomislav Vukina; Xiaoyong Zheng |
| Abstract: | In this paper we study the productivity-survival link in the U.S. poultry processing industry using the longitudinal data constructed from five Censuses of Manufactures between 1987 and 2007. First, we study the effects of physical productivity and demand-specific factors on plant survival and ownership change. Second, we analyze the determinants of the firm-level expansion. The results show that higher demand-specific factors decrease the probability of exit and increase the probability of ownership change. The effect of physical productivity on the probability of exit or ownership change is generally insignificant. Also, firms with higher demand-specific factors have higher probability to expand whereas the average firm-level physical productivity turns out to be an insignificant determinant of firm expansion. |
| Keywords: | Productivity; Demand-specific Factors; Poultry |
| JEL: | L66 D24 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:15-20&r=bec |
| By: | Jos Jansen (Department of Economics and Business Economics, Aarhus University, Denmark) |
| Abstract: | Competitive pressure is lower in markets where goods are more differentiated. I analyze how a change in the degree of horizontal product differentiation affects the incentives of duopolists to disclose quality information. If disclosure is costly, then a firm discloses high qualities but conceals low qualities in equilibrium. The higher the disclosure cost, the higher the equilibrium threshold below which firms conceal quality information. I show that the effect of product differentiation on quality disclosure depends on the cost of disclosure. For low (high) disclosure costs, a firm discloses more (less) quality information if goods become more differentiated. |
| Keywords: | Hotelling model, quality, transportation cost, product differentiation, information disclosure, disclosure cost, competitive pressure |
| JEL: | D82 D83 L13 L15 M31 |
| Date: | 2015–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2015-15&r=bec |
| By: | Degryse, Hans; Matthews, Kent (Cardiff Business School); Zhao, Tianshu |
| Abstract: | We study the sensitivity of banks’ credit supply to small and medium size enterprises (SMEs) in the UK to banks’ financial condition before and during the financial crisis. Employing unique data on the geographical location of all bank branches in the UK, we connect firms’ access to bank credit to the financial condition (i.e., bank health and the use of core deposits) of all bank branches in the vicinity of the firm over the period 2004-2011. Before the crisis, banks’ local financial conditions did not influence credit availability irrespective of the functional distance (i.e., the distance between bank branch and bank headquarters). However, during the crisis, we find that SMEs with in their vicinity banks that have stronger financial condition face greater credit availability when the functional distance is low. Our results point to a “flight to headquarters” effect during the financial crisis. |
| Keywords: | financial crisis; credit supply; flight to headquarters; flight to quality; bank organization |
| JEL: | G21 G29 L14 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2015/5&r=bec |
| By: | Gorodnichenko, Yuriy (University of California, Berkeley); Svejnar, Jan (Columbia University); Terrell, Katherine (University of Michigan) |
| Abstract: | Our estimates, based on large firm-level and industry-level data sets from eighteen countries, suggest that FDI and trade have strong positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. Moreover, our results indicate that the spillover effects can be detected with micro data at the firm-level, but that using linkage variables computed from input-output tables at the industry level yields much weaker, and usually insignificant, estimated effects. These patterns are consistent with spillover effects being rather proximate and localized. |
| Keywords: | innovation, FDI, spillovers, horizontal and vertical linkages, emerging markets, foreign competition |
| JEL: | F23 M16 O16 P23 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9259&r=bec |
| By: | Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine |
| Abstract: | Our estimates, based on large firm-level and industry-level data sets from eighteen countries, suggest that FDI and trade have strong positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. Moreover, our results indicate that the spillover effects can be detected with micro data at the firm-level, but that using linkage variables computed from input-output tables at the industry level yields much weaker, and usually insignificant, estimated effects. These patterns are consistent with spillover effects being rather proximate and localized. |
| Keywords: | emerging markets; FDI; foreign competition; horizontal and vertical linkages; innovation; spillovers |
| JEL: | F23 M16 O16 P23 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10757&r=bec |
| By: | Jos Jansen (Aarhus Universtity and Max Planck Institute for Research on Collective Goods); Andreas Pollak (University of Cologne) |
| Abstract: | We study the strategic disclosure of demand information and product-market strategies of duopolists. In a setting where both firms receive information with some probability, we show that firms selectively disclose information in equilibrium in order to influence their competitor’s product-market strategy. Subsequently, we analyze the firms’ behavior in a laboratory experiment. We find that subjects often use selective disclosure strategies, and this finding appears to be robust to changes in the information structure, the mode of competition, and the degree of product differentiation. Moreover, in our experiment, subjects’ product-market conduct is largely consistent with theoretical predictions. |
| Keywords: | common value, product differentiation, Asymmetry, Duopoly, information disclosure, skewed distribution, Incomplete Information, laboratory experiment, Cournot competition, Bertrand competition |
| JEL: | D82 L13 C92 D83 D22 M4 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2015_09&r=bec |
| By: | Grigorios Spanos (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université) |
| Abstract: | The objective of this paper is to examine the assignment of workers to layers and firms. In particular, I use an administrative dataset of French workers to study the organization of firms. First, I test whether higher ability workers are employed in the higher layers of firms. Second, I test whether there is positive assortative matching between workers in the different layers of firms. Third, I test whether higher ability workers allow their managers to increase their span of control and employ larger teams. To do this, I first classify employees as residing in different organizational layers such as production and administrative workers, supervisors, senior managers, and owners and CEOs, using occupational codes. From a panel wage regression I then obtain estimates of workers’ ability as in Abowd et al. (1999). I then study how workers sort into layers and across layers with other workers. I emphasize three results. First, higher ability workers are employed in the higher layers of firms. Second, I find evidence of positive assortative matching between workers in the different layers of firms. Third, I find different mechanisms are behind the sorting pattern observed in the data. I find evidence that higher ability workers limit their managers’ span of control, and I also find weak evidence that higher ability workers allow their managers to increase their span of control and employ larger teams. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01163607&r=bec |
| By: | Rachel Griffith (Institute for Fiscal Studies and IFS and Manchester); Sokbae Lee* (Institute for Fiscal Studies); Bas Straathof (Institute for Fiscal Studies) |
| Abstract: | There is considerable interest in understanding how important market frictions are in stiffing the transmission of ideas from one firm to another. Although the theoretical literature emphasizes the importance of these frictions, direct empirical evidence on them is limited. We use comprehensive patent data from the European Patent Office and a multiple spells duration model to provide estimates that suggest that they are substantial. It is around 30% more costly to successfully discover and utilize new ideas created in another firm than in your own. This compares to the increased costs of accessing new ideas across national borders of around 5%, and across technologies of around 20%. These result point towards substantial imperfections in the market for technology. |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:cemmap:40/14&r=bec |
| By: | Bronwyn H. Hall; Christian Helmers; Georg von Graevenitz |
| Abstract: | We analyze the effect of patent thickets on entry into technology areas by firms in the UK. We present a model that describes incentives to enter technology areas characterized by varying technological opportunity, complexity of technology, and the potential for hold?up in patent thickets. We show empirically that our measure of patent thickets is associated with a reduction of first time patenting in a given technology area controlling for the level of technological complexity and opportunity. Technological areas characterized by more technological complexity and opportunity, in contrast, see more entry. Our evidence indicates that patent thickets raise entry costs, which leads to less entry into technologies regardless of a firm?s size. |
| Keywords: | Patenting, Entry, Patent Thickets |
| JEL: | K11 L20 O31 O34 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:cgs:wpaper:60&r=bec |
| By: | Mareva Sabatier (IREGE - Institut de Recherche en Gestion et en Economie - Université de Savoie) |
| Abstract: | This article analyzes whether improving gender diversity in boardrooms improves firms' economic performance. In the context of French CAC40-listed companies between 2008 and 2012, this research uses instrumental variable panel regressions, including production frontier estimates, to arrive at two key results. First, gender diversity in boards depends on firms' attributes, including their previous gender promotion strategies. Second, promoting women in boardrooms has a significant and positive effect on economic performance, after accounting for the endogeneity of diversity. Gender diversity even reduces corporate inefficiencies and enables firms to come closer to their optimal performance. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01158917&r=bec |