nep-bec New Economics Papers
on Business Economics
Issue of 2015‒11‒01
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. University spin-off firms? internationalization: Importance of skills By Marina Van Geenhuizen; Qing Ye; Manuel Au-Yong-Oliveira
  2. Regional Characteristics and the Survival of New Firms By Charlie Karlsson; Johan Klaesson; Özge Öner
  3. Female directors, key committees, and firm performance By Colin Green; Swarnodeep Homroy
  4. The effect of local corruption on ownership strategy in cross border mergers and acquisitions By Emanuela Marrocu; Maria Chiara Di Guardo; Raffaele Paci
  5. Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance By Luca Flabbi; Mario Macis; Andrea Moro; Fabiano Schivardi
  6. Firm Performance in the Periphery: On the Relation between Firm-Internal Knowledge and Local Knowledge Spillovers By Grillitsch, Markus; Nilsson, Magnus
  7. Toxic Workers By Michael Housman; Dylan Minor
  8. Employment and Wage Insurance within Firms: Worldwide Evidence By Andrew Ellul; Marco Pagano; Fabiano Schivardi
  9. The Causality Between Entrepreneurial Activities and Regional Economic Growth: Case of Turkey By Semiha Turgut; Aliye Ahu Akgun
  10. Women entrepreneurship. Changes in access to credit and business results (2003-2013) By Antonio Garcia-Tabuenca; Federico Pablo-Martí; Fernando Crecente-Romero
  11. Small World of Inter-firm Network an Firm's Acquisition Behaviour - An Evidence from India By Biswas, Shreya
  12. Impact of Information Technology investments on firm productivity in peripherals countries: The case of Portugal By António Guerreiro; Gertrudes Guerreiro
  13. Earnings Management to Avoid Delisting from a Stock Market By Ales Cornanic; Jiri Novak
  14. Trade Dynamics and Trade Costs: First Evidence from the Exporter and Importer Dynamics Database for Germany By Wagner, Joachim

  1. By: Marina Van Geenhuizen; Qing Ye; Manuel Au-Yong-Oliveira
    Abstract: Technical and industrial competences are increasingly dispersed across the globe, urging young high-technology firms in Europe to increase distances in their knowledge relations. However, establishment and maintenance of such relationships tend to be hampered by many barriers following from short in capabilities, particularly various missing skills in the management team. In this paper, we examine the role of capability factors and particular skills among a specific category of firms, university spin-offs, in building knowledge networks abroad, specially, the spatial reach involved. Such a study is not new for (innovative) SMEs, but it is new for university spin-off firms. We use two samples of university spin-off firms (each about 100 cases) in various European countries in order to identify the importance of capabilities and certain skills in internationalization of knowledge collaboration, and to this purpose we apply various regression models. The sampled firms are of different age and find themselves in different stages of born-global development. We observe that 60 to 70 per cent of the firms employ knowledge relationships abroad, almost 35 per cent of them outside of Europe. The main underlying capability factors are a high education level (PhD), participation in market/business-related training, and a larger firm size. Another factor is a relatively low level of innovation, indicating a support structure from practical application and customer relations in an established market position of the firm abroad. Examples of such support structure are found in civil engineering works and consultancy concerning transportation infrastructure, land use/protection and the oil and gas industry. Furthermore, one set of missing skills in the management team stands out in limiting larger distances in knowledge collaboration, and these are internationalization skills, for example, skills in presentation of the firm and negotiation of important agreements with a partner abroad, dealing with uncertainty in certification issues and patent protection, and skills in branding the product abroad. Most missing skills are of the conceptual and relational type. Due to different stages in born-global development, the differentiation in missing skills is remarkably large, indicating that training to improve skills requires a multi-faceted and customized approach, without a one-size-fits-all solution. The paper concludes with a summary and some ideas for improving training.
    Keywords: global knowledge collaboration; capabilities; skills; university spin-off firms
    JEL: D03 M13 O32
    Date: 2015–10
  2. By: Charlie Karlsson; Johan Klaesson; Özge Öner
    Abstract: There is an abundant literature on industrial ecology aiming at explaining the survival propensity of recently started firms. The majority of the contributions concentrate on the character¬istics of the entre¬preneur, the new firm or the industry. Only a small mi¬nority of the ex¬isting studies consider the influence of the loca¬tion where the new firm has been started on survival probability. The evidence of the importance of location in the literature is mixed. However, only a limited share of these studies analyzes the im¬portance of lo¬calized external economies of scale for the survival of newly founded firms. This relative lack of studies is intriguing since, for example, the ?new economic geography? theory empha-sizes the role that clusters of individual industries and of complementary indus¬tries within a distinct geo¬graph¬ical area play in terms of proxim¬ity and network externalities. Thus, a basic motivation for this paper is that the absolute majority of business survival stud¬ies disregard the fundamental facts that every new firm is started in a specific location. A sec¬ond motivation is the fact that in many of the studies that include spatial factors as explana¬tory factors the representation of these factors are often not ideal. A third motivation is that the representa¬tion of geographical space has not taken into consideration of the importance of the hierarchical structure of geographical space. The purpose of this paper is to test the influence of demand and supply conditions and general economic milieu in localities on the survival of newly founded firms while controlling for firm and industry characteristics and using a proper representation of the hierarchical structure of geographical space.
    Keywords: Entry; Start-up size; Market Potential; Region; Industry; Sweden
    JEL: L11 M13 C21 R11 R12
    Date: 2015–10
  3. By: Colin Green; Swarnodeep Homroy
    Abstract: There is pressure to increase female representation on corporate boards. A number of studies have found no, or in some cases a negative, effect of female representation on boards and firm performance. We demonstrate robust positive and economically meaningful effects on firm performance of female representation on European boards.<br/>Moreover, while previous work has considered female representation broadly, we focus on membership of committees involved explicitly in firm governance. We demonstrate marked, larger, e¤ects on performance of having female representation on these committees. Finally, we reconcile this evidence with prior US and UK evidence and demonstrate a positive performance impact of female committee memberships. Our evidence is supportive of the expansion of female involvement in corporate governance from a financial performance perspective.
    Keywords: Board of directors, Female director, Diversity, Performance
    JEL: G30 G34 J16
    Date: 2015
  4. By: Emanuela Marrocu; Maria Chiara Di Guardo; Raffaele Paci
    Abstract: This paper focuses on how corruption affects an important internationalization behavior of firms: the extent of control - wholly owned subsidiary or equity participation - exercised by firms involved in cross-border mergers and acquisitions (M&A). Recently, scholars have recommended studying the effect on ownership entry mode of the quality of the target country?s overall governance infrastructure, or of its most important dimensions (Slangen and Van Tulder 2009). Among these dimensions, one of the most relevant, due to its broad effect on the economy, is corruption. Corruption can be thought of as anything that counters the legal system or that can be viewed as an inappropriate business practice (Lambert-Mogiliansky et al. 2007), which raises the level of external uncertainty in the target country and thus the cost of doing business abroad in general and specifically in the realm of M&A (see Weitzel and Berns, 2006). Although the level of corruption of the host countries is expected to have a strong influence on management decisions during acquisitions, it has been overlooked in the academic literature, and research on this topic is in its infancy. As a matter of fact, the increasing trend toward international acquisitions has created the need to address whether the extant conceptual framework and empirical evidence on international acquisitions and corruption are adequate in explaining the firm?s decision control-wise. We analyze individual data on cross-border M&A carried out by firms located in the seven largest European countries, namely Germany, France, Italy, the Netherlands, Spain, Sweden and the United Kingdom, and operating in the 10 SIC divisions. We thus consider 20,034 international M&A deals completed in 137 host countries over the period 2000-2012. We find that the relationship between the level of corruption in the host country and the firm?s probability of opting for full control mode in cross-border M&A is U-shaped. Such a relationship suggests that ownership strategy will change depending on whether the corruption is low, moderate or high. Moreover, we contribute to the extant literature by demonstrating that technological relatedness between acquirer and target and the level of connectivity (in terms of trade intensity, historical linkage, and geographic proximity) between home and host countries moderates the relationship between corruption in the host country and the level of control. Finally, after controlling for a wide range of both firm (status, industrial sector, past experience, and ownership structure) and country (culture, legal strength, risk, democracy, and business easiness) features, we found that trade intensity exerts the strongest moderating effect on corruption.
    Keywords: mergers-acquisitions; corruption; ownership strategy; technological relatedness
    JEL: C31 D73 F23 G34
    Date: 2015–10
  5. By: Luca Flabbi (Inter-American Development Bank); Mario Macis (Johns Hopkins University); Andrea Moro (Università Ca’ Foscari di Venezia); Fabiano Schivardi (Bocconi University)
    Abstract: We analyze a matched employer-employee panel data set and find that female leadership has a positive effect on female wages at the top of the distribution, and a negative one at the bottom. Moreover, performance in firms with female leadership increases with the share of female workers. This evidence is consistent with a model where female executives are better equipped at interpreting signals of productivity from female workers. This suggests substantial costs of under-representation of women at the top: for example, if women became CEOs of firms with at least 20% female employment, sales per worker would increase 6.7%.
    Keywords: executives’ gender, gender gap, firm performance, glass ceiling, statistical discrimination
    JEL: M5 M12 J7 J16
    Date: 2015
  6. By: Grillitsch, Markus (CIRCLE, Lund University); Nilsson, Magnus (Dept. of Business Administration and CIRCLE, Lund University)
    Abstract: This paper challenges one of the fundamental propositions within economic geography; that location in knowledge regions contributes to firm performance in general and especially for knowledge intensive firms that compete on the basis of knowledge. Our analysis of Swedish micro-data on 32,535 firms from 2004-2011 provides evidence that knowledge intensive firms benefit less from local knowledge spillovers than firms with comparably low in-house knowledge. This suggests that firms with high internal competencies can compensate for a lack of local knowledge spillovers and that negative knowledge externalities may make location outside knowledge centers more beneficial for such firms.
    Keywords: periphery; firm performance; spillovers; agglomeration
    JEL: O30 R10 R11
    Date: 2015–10–23
  7. By: Michael Housman (Cornerstone OnDemand); Dylan Minor (Harvard Business School, Strategy Unit)
    Abstract: While there has been a lot of research on finding and developing top performers in the workplace, less attention has been paid to the question of how to manage those workers who are harmful to organizational performance. In extreme cases, in addition to hurting performance, such workers can generate enormous regulatory and legal liabilities for the firm. We explore a large novel dataset of over 50,000 workers across 11 different firms to document a variety of aspects of workers' characteristics and circumstances that lead them to engage in "toxic" behavior. We also find that avoiding a toxic worker (or converting him to an average worker) enhances performance to a much greater extent than replacing an average worker with a superstar worker.
    Keywords: human resource management, misconduct, worker productivity, ethics, superstar
    Date: 2015–10
  8. By: Andrew Ellul (Indiana University); Marco Pagano (University of Naples Federico II); Fabiano Schivardi (Bocconi University)
    Abstract: We investigate the determinants of firms’ implicit employment and wage insurance to employees, using a difference-in-difference approach: we rely on differences between family and non-family firms to identify the supply of insurance, and exploit variation in unemployment insurance programs across and within countries to gauge workers’ demand for insurance. Using a firm-level panel from 41 countries, we find that family firms provide more stable employment than nonfamily ones, and in exchange they obtain both greater wage flexibility and lower labor cost: on average, their real wages are 5 percent lower, controlling for country, industry and time effects. The additional employment security provided by family firms is greater, and the wage discount larger, the less generous is public unemployment insurance: private and public provision of employment insurance appear to be substitutes.
    Keywords: risk-sharing, insurance, social security, unemployment, wages, family firms.
    JEL: G31 G32 G38 H25 H26 M40
    Date: 2015
  9. By: Semiha Turgut; Aliye Ahu Akgun
    Abstract: The effect of entrepreneurship on regional economic growth has been a research agenda for the last two decades. Entrepreneurship, by creating employment, fostering competitiveness or affecting employment, somehow contributes to economic development. While entrepreneurship is mostly defined or measured as numbers of self-employed, firm formation, business formation, new firm start-ups, firm births or net entry rates in the empirical studies, regional economic development is defined or measured as, the growth of gross domestic product (GDP), gross value added (GVA) and the change of employment/unemployment rate or productivity. The effect of entrepreneurship on economic growth is mainly seen in two time periods: long term and short term. In the literature, there is evidence on the effect of employment growth in short term and on the effects like crowd-out, displacement, the employment decreases because of the firm closures or employment and productivity growth caused by the new firm formations in long term. The purpose of this article is to find the causality between entrepreneurship and regional economic development in Turkey at the NUTS1 level. In order to reach this aim, entrepreneurship is measured as firm formation and net entry, while regional economic development is measured by GVA, GDP and employment. One of the well-known techniques to identify the causal relations among the variables, correlation is used to measure the length, direction and the weight of the causal affects/relations between regional economic development and entrepreneurship. First, the aim, objectives and detailed framework of this article are given. Then, in the following section, the conceptual and theoretical framework of entrepreneurship and regional economic development is discussed. The case study is given in the third section, with the explanation of data and methodology, a short brief of firm and entrepreneurship policies in Turkey and the effect of entrepreneurship on regional economic development in Turkey at two distinctive periods as 1987-2001 and 2004-2011 separately. This study is the first attempt to show such a relation between entrepreneurship and regional economic growth on the basis of the firm formation. The findings show that the causality between (or effect of) entrepreneurship and regional economic growth changes among regions, which clarifies regional similarities of diversities. Therefore, although the trends of entrepreneurship to affect regional growth in Turkey seem corresponding the findings of the current literature, eastern regions acts differently.
    Keywords: entrepreneurship; firm formation; regional economic growth
    JEL: L26 O47
    Date: 2015–10
  10. By: Antonio Garcia-Tabuenca; Federico Pablo-Martí; Fernando Crecente-Romero
    Abstract: The research on women entrepreneurship has mainly studied these topics: i) the characteristics and motivations (Brush and Hisrich, 1991; Pablo-Martí et al., 2014), ii) the strategic choice (Verheul et al., 2008), iii) the role of leadership (Schwartz, 1976; Justo et al. 2006)), iv) the entry barriers (Brush and Gatewood, 2008), mainly access to funding (Klapper and Parker, 2010), and v) the performance and achieved results (Coleman and Robb, 2009; Díaz and Jiménez, 2010; Crespo-Espert et al., 2012). These topics have been well studied. However, further research on this field is required. The long period of crisis from 2007 on has changed some of the findings related to these issues. This is especially significant in the most affected economies such as those of the southern countries of the EU. In these countries the severity of the crisis has had significant consequences for the productive sector (destruction of companies, high unemployment, credit restrictions) and on public finances under severe uncertainty (sovereign debt crisis, banking crisis). This is generating major changes in productive activity and business competitiveness, which is associated with the deleveraging of companies, as well as the varying prevalence of smaller companies (SMEs) in the economies. In this context, it may be hypothesized that the progress and results of activities led by women entrepreneurs had significant changes between the period before the crisis and the current stage of uncertain recovery. In this paper we analysed the dynamics and evolution of entrepreneurial activity of women in Spain in the period 2003-2013. It includes a stage of strong expansion and other recessive. Also, the research focuses on the differences found in two of the topics listed above: a) the obstacles in accessing to funding and b) the results of businesses women-owned compared to those of male-owned businesses. We made use of the SABI database. It includes information from the commercial registers. It has over one million companies with employees that represent most of the Spanish companies. The samples for this study differentiate whether the company is owned by a man or a woman. These samples are representative for company sizes, sectors and regions. Thus the results that adopt a regional approach can be segmented for a better understanding of the different types of women's businesses. The variables of the study are some financial indicators: credit ratio, debt ratio, productivity, EBITDA over assets, EBITDA over turnover, economic profitability and financial profitability. We employ various dummies to control for differences in size, sector and location of firms. The results allow understanding the different behaviour of women entrepreneurs and its reasons. They can also serve to develop new entrepreneurship policies related to gender in economic recovery.
    Keywords: women entrepreneurs; credit; debt; business results; SMEs; business cycle
    JEL: B54 M21 G30
    Date: 2015–10
  11. By: Biswas, Shreya
    Abstract: Using a sample of listed firms in India, the study finds that the inter-firm network on account of director interlocks is a small world and the network has become more integrated since the introduction of corporate governance regulations in the country. Firm level analysis finds a negative relation between average path length and probability of acquiring indicating the importance of faster reach of information among the firms within the network. It also finds a non-linear relation given by inverted U-shaped curve between firm level clustering and probability of acquiring. Initially, increase in clustering has a positive effect through the informational quality effect; however at higher levels the negative informational redundancy effect dominates leading to a curvilinear relation.
    Keywords: Corporate Governance, Small-world, Director Interlocks, Inter-firm Network, Acquisitions
    JEL: G32 G34 L25
    Date: 2015
  12. By: António Guerreiro; Gertrudes Guerreiro
    Abstract: IS/IT investments are seen has having an enormous potential impact on the competitive position of the firm, on its performance, and demand an active and motivated participation of several stakeholder groups. The shortfall of evidence concerning the productivity of IT became known as the ?productivity paradox?. As Robert Solow, the Nobel laureate economist stated ?we see computers everywhere except in the productivity statistics?. An important stream of research conducted all over the world has tried to understand these phenomena, called in the literature as «IS business value» field. However there is a gap in the literature, addressing the Portuguese situation. No empirical work has been done to date in order to understand the impact of Information Technology adoption on the productivity of those firms. Using data from two surveys conducted by the Portuguese National Institute of Statistics (INE), Inquiry to the use of IT by Portuguese companies (IUTIC) and the Inquiry Harmonized to (Portuguese) companies (accounting data), this study relates (using regression analysis) the amounts spent on IT with the financial performance indicator Returns on Equity, as a proxy of firm productivity, of Portuguese companies with more than 250 employees. The aim of this paper is to shed light on the Portuguese situation concerning the impact of IS/IT on the productivity of Portuguese top companies. Empirically, we test the impact of IIT expenditure on firm productivity of a sample of Portuguese large companies. Our results, based on firm-level data on Information Technology expenditure and firm productivity as measured by return on equity (1186 observations) for the years of 2003 and 2004, exhibit a negative impact of IT expenditure on firm productivity, in line with ?productivity paradox? claimants.
    Keywords: Information Technology investments; Firm Productivity; Return on Equity
    JEL: M10 M15 M20 O30
    Date: 2015–10
  13. By: Ales Cornanic (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic); Jiri Novak (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)
    Abstract: We show that firms ‘in danger’ of being delisted from a stock market (NASDAQ) report higher performance-adjusted discretionary accruals and the inflated accruals are associated with an increased likelihood of maintained listing. Accruals of firms ‘in danger’ are less positive in fiscal quarters audited by a Big-4 auditor and after the implementation of SOX. In contrast, accruals are higher for firms that benefit most from public listing and for firms with good future prospects. This suggests that managers consider reputation and litigation risk associated with earnings management and they manage earnings only when they believe the firm will recover in near future. The market can thus interpret discretionary accruals as a signal revealing managers’ private information about firm quality. Consistent with the signaling explanation we observe a stronger stock price reaction on the announcement of earnings that contain large accruals in threatened firms.
    Keywords: Delisting, earnings management, discretionary accruals, insider trading, reverse stock split, audit, Sarbanes-Oxley Act
    Date: 2015–08
  14. By: Wagner, Joachim (Leuphana University Lueneburg and Centre of Excellence for Science and Innovation Studies (CESIS), KTH Stockholm)
    Abstract: This note uses the newly available Exporter and Importer Dynamics Database for Germany to investigate the links between trade dynamics and trade costs. It shows results for the dynamics of Germany’s goods trade as a whole, and for trade with two of the most important partner countries, namely France and China. Furthermore, it reports results from the first empirical study that searches for links between measures of trade dynamics (entry, exit and survival rates, and share of entrants, in total exports and imports) in destination countries of exports and countries of origin of imports on the one hand and characteristics of these countries (distance to Germany, difficulty of foreign trade, and market size) on the other hand.
    Keywords: Exports; imports; transaction level data; Germany
    JEL: F14
    Date: 2015–10–23

This nep-bec issue is ©2015 by Vasileios Bougioukos. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.