nep-bec New Economics Papers
on Business Economics
Issue of 2015‒11‒07
fifteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Grown-Up Business Cycles By Benjamin W. Pugsley; Aysegül Sahin
  2. Women on board and performance of family firms: Evidence from India By Jayati Sarkar; Ekta Selarka
  3. Does Cultural Diversity of Migrant Employees Affect Innovation? By Ceren Ozgen; Cornelius Peters; Annekatrin Niebuhr; Peter Nijkamp; Jacques Poot
  4. The Promise and Potential of Linked Employer-Employee Data for Entrepreneurship Research By Christopher Goetz; Henry Hyatt; Erika McEntarfer; Kristin Sandusky
  5. Inter- and intra-firm linkages: Evidence from microgeographic location patterns By Behrens, Kristian; Sharunova, Vera
  6. Distorted Trade Barriers: A Dissection of Trade Costs in a "Distorted Gravity" Model By Tibor Besedes; Matthew T. Cole
  7. The impact of cultural diversity on firm innovation: evidence from Dutch micro-data By Ceren Ozgen; Peter Nijkamp; Jacques Poot
  8. Credit Distribution and Exports: Microeconomic Evidence from China By Yao Amber Li; Albert Park; Chen Zhao
  9. Do Foreign Workers Reduce Trade Barriers? Microeconomic Evidence By Andrews, Martyn J.; Schank, Thorsten; Upward, Richard
  10. Quality costs and Corporate Taxation. Literature review. By Flamino Viola; Margarida Saraiva
  11. Full versus Partial Delegation in Multi-Task Agency By Barbara Schöndube-Pirchegger; Jens Robert Schöndube
  12. Corporate Venture Capital im Bankensektor: Eine Fallstudie By Maxin, Hannes
  13. The Investigation Of Recent Trends In Turkish Current Account By Hasan Cömert; Umut Ünal; Gökay Yüksel
  14. Who financed the expansion of the equity market? Shareholder clienteles in Victorian Britain By Acheson, Graeme G.; Campbell, Gareth; Turner, John D.
  15. The Impact of Part-Time Work on Firm Total Factor Productivity: Evidence from Italy By Devicienti, Francesco; Grinza, Elena; Vannoni, Davide

  1. By: Benjamin W. Pugsley; Aysegül Sahin
    Abstract: We document two striking facts about U.S. firm dynamics and interpret their significance for employment dynamics. The first is the dramatic decline in firm entry and the second is the gradual shift of employment toward older firms since 1980. We show that despite these trends, the lifecycle dynamics of firms and their business cycle properties have remained virtually unchanged. Consequently, aging is the delayed effect of accumulating startup deficits. Together, the decline in the employment contribution of startups and the shift of employment toward more mature firms contributed to the emergence of jobless recoveries in the U.S. economy.
    Keywords: firm dynamics, employment dynamics, business cycles, entrepreneurship
    Date: 2015–10
  2. By: Jayati Sarkar (Indira Gandhi Institute of Development Research); Ekta Selarka (Madras School of Economics)
    Abstract: This paper provides evidence on the effect of women directors on the performance of family firms with a case study of India. Existing literature on the subject has primarily focused on widely held firms, notably in the US. Given that ownership structure and governance environment of family firms are distinctly different from those of non-family firms, the evidence on the relationship between women on board and firm performance in the context of widely held firms may not apply in the context of family firms. India provides an ideal setting for analyzing this question as the presence of family firms is pervasive and since 2013 India has instituted gender quotas on corporate boards. Using a data-set of 10218 firm year observations over a ten year period from 2005 to 2014 which spans the pre-quota and post-quota years, we find robust evidence that women directors on corporate boards positively impact firm value and that this effect increases with the number of women directors on board. However, we find that the positive effect of gender diversity on firm performance weakens with the extent to which the family exerts control through occupying key management positions on the board. In addition, women directors affiliated to the family have no significant effect on firm value, whereas independent women directors do. Our results with respect to profitability are somewhat different; while as in the case of market value, women directors positively impact profitability with the positive effect driven by independent women directors, the effect does not vary with the extent of family control. Taken together, our results suggest that though gender diversity on corporate boards may positively impact firm performance in family firms in general, the extent of family control can have a significant bearing on this relationship. The findings from this study could be instructive for emerging economies like India in promoting gender-based quotas on corporate boards.
    Keywords: board of directors, gender diversity, family ownership and control, gender-quota
    JEL: G32 G34 G38
    Date: 2015–10
  3. By: Ceren Ozgen (VU University Amsterdam); Cornelius Peters (IAB); Annekatrin Niebuhr (Christian-Albrechts-Universitat zu Kiel); Peter Nijkamp (VU University Amsterdam); Jacques Poot (University of Waikato)
    Abstract: Increasing international labor migration has important effects on the workforce composition of firms in all migrant-receiving countries. The consequences of these changes for firm performance have attracted growing attention in recent years. In this paper, we focus explicitly on the impact of cultural diversity among migrant employees on the innovativeness of firms. We briefly synthesize empirical evidence from a range of contexts across Europe, North America, and New Zealand. We then utilize two unique and harmonized linked employer–employee datasets to provide comparative microeconometric evidence for Germany and the Netherlands. Our panel datasets contain detailed information on the generation of new products and services, determinants of innovation success, and the composition of employment in establishments of firms over the period 1999 to 2006. We find that innovation in both countries is predominantly determined by establishment size and industry. Moreover, obstacles encountered and organizational changes faced by firms drive innovation too. With respect to the composition of employment, the presence of high-skilled staff is most important. Cultural diversity of employees has a positive partial correlation with product innovation. The size and statistical significance of this effect depends on the econometric model specification and the country considered. We conclude from the literature synthesis and the new comparative evidence that cultural diversity of employees can make a positive, but modest and context dependent, contribution to innovation.
    Date: 2014–12
  4. By: Christopher Goetz; Henry Hyatt; Erika McEntarfer; Kristin Sandusky
    Abstract: In this paper, we highlight the potential for linked employer-employee data to be used in entrepreneurship research, describing new data on business start-ups, their founders and early employees, and providing examples of how they can be used in entrepreneurship research. Linked employer-employee data provides a unique perspective on new business creation by combining information on the business, workforce, and individual. By combining data on both workers and firms, linked data can investigate many questions that owner-level or firm-level data cannot easily answer alone - such as composition of the workforce at start-ups and their role in explaining business dynamics, the flow of workers across new and established firms, and the employment paths of the business owners themselves.
    JEL: J21 L26
    Date: 2015–10
  5. By: Behrens, Kristian; Sharunova, Vera
    Abstract: Multiunit firms can draw on internal resources, thus their plants should depend less on external agglomeration benefits than comparable standalone plants. Because interacting at a distance is costly, multiunit firms should also be geographically 'compact'. We dissect the microgeographic location patterns of hundreds of thousands of Canadian establishments and find robust evidence for these predictions: multiunit firms are compact, and their plants locate in areas offering potentially less external agglomeration benefits. Within firms, plants with stronger vertical links are geographically more central. The latter effect is stronger for plants in high transport cost industries that produce durables and source a larger share of non-homogeneous inputs. These findings suggest that vertical supply chains are important in explaining firms' internal spatial organization.
    Keywords: inter-firm linkages; intra-firm linkages; microgeographic location patterns; multiunit firms; spatial organization of firms
    JEL: D22 L22 R12 R32
    Date: 2015–11
  6. By: Tibor Besedes (Department of Economics, Georgia Institute of Technology); Matthew T. Cole (Department of Economics, California Polytechnic State University)
    Abstract: It is quite common in the trade literature to use iceberg transport costs to represent variable trade barriers, both tariffs and shipping costs alike. However, in models with monopolistic competition these are, in fact, not identical trade restrictions. This difference is not driven by tariff revenue but by how the two trade costs affect firm profits and the extensive margin. We illustrate these differences in a gravity model `a la Chaney (2008). We show theoretically that trade flows are more elastic with respect to ad valorem tariffs than transport costs and find a linear relationship between the elasticities with respect to ad valorem tariffs, iceberg transport costs, and fixed market costs. We empirically validate these results using data on U.S. product-level imports.
    Keywords: Gravity, firm heterogeneity, monopolistic competition
    JEL: F12 F13 F17
    Date: 2015
  7. By: Ceren Ozgen (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam); Jacques Poot (University of Waikato)
    Abstract: An important question for firms and policymakers is whether the recruitment of foreign workers can boost innovation. Migration studies have demonstrated positive economic impacts of cultural diversity on productivity and innovation at the regional level, but the impacts at firm level are less well known. Merging data from four different sources, provided by Statistics Netherlands, we construct and analyze a unique linked employer-employee micro dataset of 4582 firms that includes qualitative information on firm innovation. We consider both the number of immigrants these firms employ and their cultural diversity. Potential endogeneity of migrant employment is addressed by an instrumental variables approach that accounts for the past geographic distribution of immigrants and the past culinary diversity of the municipality the firm is located in. We find robust evidence that firms employing relatively more migrants are less innovative. However, there is evidence of integration in that this effect is generall less strong or even absent for second generation immigrants. Moreover, firms employing a more diverse foreign workforce are more innovative, particularly in terms of product innovations. The benefits of diversity for innovation are more apparent in sectors employing relatively more skilled immigrants.
    Keywords: Immigration,Innovation,Cultural diversity, Knowledge spillovers,Netherlands
    JEL: D22 F22 O31
    Date: 2013–12
  8. By: Yao Amber Li (Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Albert Park (Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Chen Zhao (Department of Economics, Hong Kong University of Science and Technology)
    Abstract: This paper explores how the distribution of credit supply within an industry affects that industry's export intensity (the export-to-sales ratio) and export propensity (the ratio of the number of exporters to the total number of firms). Using a heterogeneous firm trade model, we derive two opposing hypotheses: for industries with relatively low (high) foreign market penetration costs, a more dispersed credit distribution decreases (increases) the industry's export intensity and the number of exporters. The empirical results using Chinese firm-level data and bank loan data support both hypotheses and confirm the significant heterogeneous impacts of credit distribution on exports across industries.
    Keywords: credit constraints, credit supply, financial development, credit distribution, heterogeneous firms, international trade, liquidity
    JEL: F14 G20 L60
    Date: 2015–11
  9. By: Andrews, Martyn J. (University of Manchester); Schank, Thorsten (University of Mainz); Upward, Richard (University of Nottingham)
    Abstract: This paper provides evidence that foreign workers reduce firms' trade costs and thus increase the probability that firms export. This informs both the literature on trade costs and the microeconomic literature on firms' export behaviour. We identify the nationality of each worker in a large sample of German establishments, and relate this to the exporting behaviour of these establishments. We allow for the possible endogeneity of an establishment's workforce by instrumenting the share of foreign workers with the regional distribution of foreign workers in the wider labour market. We find a significant effect of worker nationality on exporting which is not driven by the industrial, occupational or locational concentration of migrants. The effect is much stronger for senior occupations, which are more likely to have a role in exporting decisions by the establishment. The relationship is also stronger when we consider exports to particular regions and workers from these regions, consistent with a gravity model in which trade flows from country i to j are a function of migrants from j in i.
    Keywords: international migration, trade barriers, exports, employer-employee data, firm-level analysis
    JEL: F16 F22
    Date: 2015–10
  10. By: Flamino Viola (University of Évora, PhD Student and CEFAGE, Portugal); Margarida Saraiva (University of Évora and BRU-UNIDE/ISCTE-IUL)
    Abstract: The literature on Total Quality Management (TQM) has never questioned whether there is any relationship between quality and taxation. This paper demonstrates that quality and taxation are two interdependent social realities that can and should be used together in the explanation of phenomena of an economic nature, and that there is a connection and interdependence between quality and taxation at the economic and business level. The relationship between quality and taxation at the corporate level occurs as a result of firms feeling the need to carry out more efficient management of resources. This efficient resource management requires that firms should have more precise and accurate information about all their costs including those associated with meeting their tax obligations (compliance costs). Quality is not alien to these issues: TQM and quality costs are strategies that can be applied to all activities undertaken by firms including their own tax practice. The PAF model, by allowing the reduction of compliance costs, is considered a useful and essential tool for business taxation.
    Keywords: Cost of quality; Taxation; Total Quality Management; Quality.
    JEL: H32
    Date: 2015
  11. By: Barbara Schöndube-Pirchegger (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Jens Robert Schöndube (Faculty of Economics and Management, Leibniz University Hannover)
    Abstract: We consider a moral hazard type agency problem. Two tasks need to be performed within the agency. The principal can either delegate both tasks to the agent or perform one of the tasks himself. In the latter case the principal can choose which task to delegate but doing both personally is not feasible. As firm value is not contractible by assumption the incentive contract offered to the agent needs to be based on a possibly non-congruent performance measure. Allowing for both of the players to be risk averse, agency costs can arise from a trade-off in allocating incentives and risk as well as from a congruity problem. While full delegation results in a standard two task agency problem, partial delegation creates a double moral hazard problem as neither the principal can observe the agent’s effort nor vice versa. We find that full delegation is more favorable the more risk is optimally allocated to the agent. Accordingly partial delegation is beneficial if the principal has a relatively low degree of risk aversion. Moreover, full delegation allows the principal to scale incentives provided to the agent but not to fine tune the intensity of incentives for each effort separately. With partial delegation fine tuning is possible but increasing incentives for one effort implies reducing them for the other. If scaling is more effective in minimizing agency costs than fine tuning incentives, the principal tends to prefer full delegation to partial delegation and vice versa.
    Keywords: Delegation, agency problem, congruity, risk sharing
    Date: 2015–11
  12. By: Maxin, Hannes
    Abstract: Digitization of society has a strong effect on the banking sector. This circumstance is shown by the increasing success of young FinTech firms and the pressure to innovate for traditional banks. Therefore Commerzbank AG found an own corporate venture Capital firm (CVC firm), the Main Incubator GmbH, in March 2014. This CVC firm supports its parent company to cooperate with FinTech firms and to implement synergy potential for the own core business. In the research literature CVC activities are primarily assigned to the industrial and service sectors and not to the banking sector. Due to this fact Main Incubator is an unusual case, which is analyzed in a case study. The aim of this project is to show specific characteristics of a CVC firm of the banking sector.
    Keywords: Corporate venture capital, Banks, Case study, Principal-agent, FinTech firms
    JEL: G24 M13
    Date: 2015–10
  13. By: Hasan Cömert (METU); Umut Ünal (Turgut Özal University); Gökay Yüksel (METU)
    Abstract: International trade has been very important for both economic and political reasons. Correspondingly, world trade volume has been uninterruptedly rising. By the same token, Turkish trade volume, in line with other developing countries, has been also growing. However, Turkey has been chronically suffering from current account deficit problems for years. The main objective of the article is to search for the determinants of Turkish current account and a possible structural break in it. There are two main findings of the article. First, the evidence from a Vector Autoregressive (VAR) model suggests that the main determinants of Turkish current account are mostly structural factors. Specifically, the VAR model implies that the dependence on intermediate goods importation to produce export commodities and change in energy prices play crucial roles in the trends in Turkish current account. Second, our findings demonstrate that there is a structural break in Turkish current account around 1999.
    Keywords: Current Account Balance, Structural Break, Turkish Economy
    JEL: F32 L16 O52
    Date: 2015
  14. By: Acheson, Graeme G.; Campbell, Gareth; Turner, John D.
    Abstract: Who financed the great expansion of the Victorian equity market, and what attracted them to invest? Using data on 453 firm-years and over 172,000 shareholders, we find that the largest providers of capital were rentiers, men with no formal occupation who relied on investment income. We also see a substantial growth in women investors as time progressed. In terms of clientele effects, we find that rentiers invested in large firms, whilst businessmen were the venture capitalists of young, regional enterprises. Women and the middle classes preferred safe investments, whilst financiers and institutional investors were speculators in foreign companies. Our results may help to explain the growth of new types of assets catering for particular clienteles, and the development of managerial policies on dividends and share issues.
    Keywords: shareholders,equity,stock market,gentlemen capitalists,rentiers,gender
    JEL: G10 N23
    Date: 2015
  15. By: Devicienti, Francesco (University of Turin); Grinza, Elena (University of Turin); Vannoni, Davide (University of Turin)
    Abstract: In this paper, we explore the impact of part-time work on firm productivity. Using a large panel data set of Italian corporations' balance sheets for the period 2000-2010, we first estimate the total factor productivity (TFP) of each firm for each year. We use different approaches aimed at solving input simultaneity, including a version of Ackerberg et al.'s (2006) control function approach, which accounts for firm fixed effects. We then match the TFP estimates with rich information on the firms' use of part-time work obtained from survey data and estimate the impact of part-time work on TFP at the firm level. We find that an increase of 1 standard deviation in the part-time share reduces TFP by 2.03%. The results suggest that this harmful effect stems from horizontal rather than vertical part-time arrangements. We also find that firms declaring that they use part-time work to accommodate workers' requests suffer the most. Moreover, we show that the so-called 'flexible' and 'elastic' clauses are successful in reducing the negative impact associated with part-time work.
    Keywords: part-time work, horizontal and vertical part-time contracts, flexible and elastic clauses, firm total factor productivity (TFP), semiparametric estimation methods
    JEL: L23 L25 J23
    Date: 2015–10

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