nep-bec New Economics Papers
on Business Economics
Issue of 2015‒10‒17
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Role of Physical and Financial Constraints in Export Dynamics By Crespo, Aranzazu; Muñoz-Sepulveda, Jesus A.
  2. Exporting firm dynamics and productivity growth: Evidence from China By Xiaobing, Huang; Xiaolian, Liu
  3. Automation, Performance and International Competition: Firm-level Comparisons of Process Innovation By Kromann, Lene; Sørensen, Anders
  4. Gender Gaps in Performance: Evidence from Young Lawyers By Azmat, Ghazala; Ferrer, Rosa
  5. A Coasian model of international production chains By Fally,Thibault; Hillberry,Russell Henry
  6. Micro-evidence on product and labor market regime differences between Chile and France By Dobbelaere S.; Lauterbach R.; Mairesse J.
  7. Price Competition in Product Variety Networks By Ushchev, Philip; Zenou, Yves
  8. The effect of cross-border group taxation on ownership chains By Rünger, Silke
  9. International Deal Experience and Cross-Border Acquisitions By Caleb
  10. On the Observational Equivalence of Unilateral Delegation Contracts in Duopoly By F. Delbono; L. Lambertini
  11. The (dis-)embedded firm: Complex structure and dynamics in inter-firm relations. Adding institutionalization as a Veblenian dimension to the Coase-Williamson approach – An emerging triangular organizational space By Elsner, Wolfram; Schwardt, Henning
  12. Hierarchical Experimentation By Chia-Hui Chen; Junichiro Ishida
  13. Addressing the absence of hours information in linked employer-employee data By Richard Fabling; David C Maré

  1. By: Crespo, Aranzazu; Muñoz-Sepulveda, Jesus A.
    Abstract: How do firms' sales interact across markets? Recent empirical work has suggested that foreign and domestic sales are substitutes for firms facing financial and physical capacity constraints. Using a large Spanish firm-level database for the period 1990-2011, we study the interconnections between exports and domestic sales. We provide a new measure to determine if firms face physical constraints based on the capacity utilization of the firm, and document that it is independent of firm fundamentals such as value added and productivity. Then, we built a theoretical framework consistent with the empirical facts presented where firms are heterogeneous across capacity and productivity. A firm facing a binding capacity constraint faces a trade-off between selling on the domestic market or the foreign market, and raises prices in order to take advantage of access to new markets. We establish the prevalence of these anomalous firms, and demonstrate that capacity constrained firms substitute sales across locations.
    Keywords: Export dynamics, Firm heterogeneity, Capacity constraints, Financial constraints, Market access
    JEL: F12 F14 L11 L13
    Date: 2015
  2. By: Xiaobing, Huang; Xiaolian, Liu
    Abstract: This paper analyzes the reallocation effects generated by dynamics of exporting firms adopting DOPD productivity decomposition. The authors select the exporting firm samples from the dataset of Annual Surveys of Industrial Production for the period from 2005 to 2009. The study indicates that the surviving ability of exporters is weak, and that firm turnover is turbulent. The reallocation effects generated by firm dynamics contributes almost half of productivity improvement. It mainly originates from between-firm effects, rather than firm turnover effects, with the entry effects being negative. This suggests that there is market misallocation, which maybe caused by uneven regional development, industrial monopoly or state-owned enterprises.
    Keywords: exporting firms,firm dynamics,productivity growth,reallocation effect,China
    JEL: F14 D40 D22 D24
    Date: 2015
  3. By: Kromann, Lene (Department of Economics, Copenhagen Business School); Sørensen, Anders (Department of Economics, Copenhagen Business School)
    Abstract: This paper presents new evidence on tradeinduced automation in manufacturing firms using unique data combining a retrospective survey that we have assembled with register data for 2005-2010. In particular, we establish a causal effect where firms that have specialized in product types for which the Chinese exports to the world market has risen sharply invest more in automated capital compared to firms that have specialized in other product types. We also study the relationship between automation and firm performance and find that firms with high increases in scale and scope of automation have faster productivity growth than other firms. Moreover, automation improves the efficiency of all stages of the production process by reducing setup time, run time, and inspection time and increasing uptime and quantity produced per worker. The efficiency improvement varies by type of automation.  
    Keywords: automation; productivity; production theory; efficiency
    JEL: D24 L11 L22 O33
    Date: 2015–10–01
  4. By: Azmat, Ghazala; Ferrer, Rosa
    Abstract: This paper documents and studies the gender gap in performance among associate lawyers in the United States. Unlike other high-skilled professions, the legal profession assesses performance using transparent measures that are widely used and comparable across firms: the number of hours billed to clients and the amount of new client revenue generated. We find clear evidence of a gender gap in annual performance with respect to both measures. Male lawyers bill ten percent more hours and bring in more than twice the new client revenue than do female lawyers. We demonstrate that the differential impact across genders in the presence of young children and differences in aspirations to become a law firm partner account for a large share of the difference in performance. We also show that accounting for performance has important consequences for gender gaps in lawyers’ earnings and subsequent promotion. Whereas individual and firm characteristics explain up to 50 percent of the earnings gap, the inclusion of performance measures explains a substantial share of the remainder. Performance measures also explain a sizeable share of the gender gap in promotion.
    Keywords: gender gaps; high-skilled professionals; performance measures
    JEL: J16 J44 K40 M52
    Date: 2015–10
  5. By: Fally,Thibault; Hillberry,Russell Henry
    Abstract: International supply chains require the coordination of numerous activities across multiple countries and firms. This paper develops a theoretical model of supply chains in which the measure of tasks completed within a firm is determined by parameters that define transaction costs and the cost of coordinating more activities within the firm. The structural parameters that govern these costs explain variation in supply chain length as well as cross-country variation in gross-output-to-value-added ratios. The structural parameters are linked to comparative advantage along and across supply chains. The paper provides an analytical treatment of trade and welfare responses to trade cost change in a simple two-country model. To explore the model's implications in a richer setting, the model is calibrated to match key observables in East Asia, and the calibrated model is used to evaluate implications of changes in model parameters for trade, welfare, the length of supply chains, and countries'relative position within them.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Emerging Markets,Labor Policies
    Date: 2015–10–06
  6. By: Dobbelaere S.; Lauterbach R.; Mairesse J. (UNU-MERIT)
    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 omperfections, 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 Halls 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: Single Equation Models; Single Variables: Models with Panel Data; Longitudinal Data; Spatial Time Series; Firm Behavior: Theory; Trade Unions: Objectives, Structure, and Effects; Oligopoly and Other Imperfect Markets;
    JEL: C23 D21 J51 L13
    Date: 2015
  7. By: Ushchev, Philip; Zenou, Yves
    Abstract: We develop a product-differentiated model where the product space is a network defined as a set of varieties (nodes) linked by their degree of substituabilities (edges). In this network, we also locate consumers so that the location of each consumer (node) corresponds to her "ideal" variety. We show that there exists a unique Nash equilibrium in the price game among firms. Equilibrium prices are determined by firms' weighted Bonacich centralities and the average willingness to pay across consumers. They both hinge on the network structure of the firm-product space. We also investigate how local product differentiation and the spatial discount factor affect the equilibrium prices. We show that these effects non-trivially depend on the network structure. In particular, we find that, in a star-shaped network, the firm located in the star node does not always enjoy higher monopoly power than the peripheral firms.
    Keywords: monopolistic competition; networks; product variety; spatial competition
    JEL: D43 L11 L13
    Date: 2015–10
  8. By: Rünger, Silke
    Abstract: I examine the influence of cross-border group taxation on ownership chains for European multinational firms. I show that the tax advantages of cross-border group taxation regimes can only be exploited if a multinational firm has at least one intermediate subsidiary in the country allowing for cross-border group taxation. I use the introduction of the Austrian cross-border group taxation regime as a natural experiment to test my hypothesis. I find that the probability that a foreign parent company holds an Austrian intermediate subsidiary is significantly higher after the introduction of the group taxation regime. However, I am only able to observe this effect for parent companies already invested in Austria prior to the introduction of the cross-border group taxation regime. I am unable to provide evidence that this also holds for parent companies who are not invested in Austria prior to the introduction of the cross-border group taxation regime. My results contribute to a nascent literature that examines the influence of taxes on ownership chains, and a larger literature on (intermediate) subsidiary location decisions for multinationals. My findings provide empirical evidence that could be useful to governments in those countries attempting to reform their group taxation regimes, or who are implementing cross-border group taxation regimes for the first time.
    Keywords: group taxation,ownership chains,intermediate subsidiaries,Austria
    JEL: F23 H25 K34
    Date: 2015
  9. By: Caleb (Department of Economics, Davidson College)
    Abstract: By tracing nearly thirty thousand directors as they move across firms during a twenty-eight year period, I show that that a firm's decision to undertake its first cross-border acquisition is positively influenced by experience with these transactions gained by its current board members during their prior service on other companies' boards. Board experience most affects acquisitions of targets headquartered in culturally or institutionally dissimilar countries, with these deals being more likely to be completed successfully and to be received favorably by financial markets. These findings imply that the geography of international fixed capital investments is influenced by the experiential human capital of a firm's board of directors. Publication Status: Working Paper
  10. By: F. Delbono; L. Lambertini
    Abstract: In a Cournot duopoly, if only one firm hires a manager while the other remains entrepreneurial, the Cournot-Stackelberg equilibrium emerges, with the managerial firm as the leader. This happens under at least three different delegation schemes. We illustrate the different meachanisms driving this outcome through the analysis of the map of best replies at the market stage.
    JEL: D43 L13 L21
    Date: 2015–10
  11. By: Elsner, Wolfram; Schwardt, Henning
    Abstract: The increasing complexity of the environment of firms, of strategic interaction, and emergent informal institutional network cooperation, seems to outreach the traditional Coase-Williamson transaction-cost framework with its market-hierarchy dichotomy. We propose to take the complexity of nowadays’ firm ecologies more serious and integrate an institutional dimension to enhance the analysis of real-world organizational forms and the theory of the firm. This institutional dimension is conceptualized as an “OIE” (Veblenian) “institutional dichotomy” that ranges between “instrumental” cooperative networking and “ceremonial encapsulation” (lock-in). Thus, a more comprehensive two-dimensional, particularly triangular, organizational space is drafted, which can better map the numerous and diverse forms of production and innovation systems, including their emergence as spatial clusters and corporate networks. The additional dimension integrates institutionalized network cooperation as “instrumental problem-solving”, vs. power and status seeking (by both large hierarchies and fiercely rivalling market participants) as “ceremonial dominance”. In addition to ideal market and hierarchy, it provides the ideal solution of institutionalized network cooperation, learned in recurrent social-dilemma problems, as a third vanishing point and corner. The resulting Organizational Triangle is considered a heuristic for inter-firm organizational research. As a check of its usefulness, this device is applied to recent developments in the global corporate economy.
    Keywords: Theory of the firm; direct interdependence/strategic interaction; institutional emergence/institutionalized cooperation; Coase/Williamson; embeddedness; Veblenian institutional dichotomy; instrumental/ceremonial institutional aspects; spatial clusters/firm networks; open innovation; organizational triangle
    JEL: B52 D02 D23 D85 L14
    Date: 2015–10–12
  12. By: Chia-Hui Chen; Junichiro Ishida
    Abstract: We consider a bandit problem faced by a team of two heterogeneous players. The team is hierarchical in that one (the principal) retains the exclusive right to terminate the project while the other (the agent) focuses strictly on implementing the project assigned to him. As a key departure, we assume that the principal may be privately informed about the project quality. In contrast to the existing literature, the belief in our model is generally non-monotonic: while each failure makes the agent less confident in the project, the uninformed principal drops out gradually over time, which partially restores his confidence. We derive explicit solutions for the agent's effort and the principal's exit decisions, which allow us to obtain a full characterization of the equilibrium. We also discuss the role of effort monitoring in this context and suggest a new rationale for delegation.
    Date: 2015–10
  13. By: Richard Fabling (Independent Researcher); David C Maré (Motu Economic and Public Policy Research)
    Abstract: The availability of tax-based payroll data has proved a blessing to labour and business economists wishing to understand workers, their jobs and their employers. Unfortunately, administrative data do not always include key variables of interest. In the case of New Zealand, linked employer-employee data do not include any information on hours worked. We implement a set of complementary methods to patch this gap, deriving an approximate measure of full-time equivalent labour input. In addition, and more specific to the New Zealand data environment, we describe a method for identifying working proprietors using annual tax-filed information, thus providing a more complete picture of total firm labour input.
    Keywords: Linked employer-employee tax data, measuring labour input, full-time equivalent, working proprietors
    JEL: D22 L11 Q54
    Date: 2015–10

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