nep-bec New Economics Papers
on Business Economics
Issue of 2015‒11‒21
seventeen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Efficiency of Female Leaders in Family and Non-Family Firms By Bjuggren, Per-Olof; Nordström, Louise; Palmberg, Johanna
  2. Betting on Exports: Trade and Endogenous Heterogeneity By Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino A
  3. On dynamic standards for energy efficiency in differentiated duopoly By Peter Michaelis; Thomas Ziesemer
  4. SMEs and access to bank credit: Evidence on the regional propagation of the financial crisis in the UK By Degryse, Hans; Matthews, Kent; Zhao, Tianshu
  5. Strategic decision behavior and audit quality of big and small audit firms in a tendering process By Fochmann, Martin; Haak, Marcel
  6. Vertical Integration, Knowledge Disclosure and Decreasing Rival's Cost By Chrysovalantou Miliou; Emmanuel Petrakis
  7. CEO turnover and relative performance evaluation By Dirk Jenter; Fadi Kanaan
  8. Does Exporting Improve Firms' CO₂ Emissions Intensity and Energy Intensity? Evidence from Japanese manufacturing By JINJI Naoto; SAKAMOTO Hiroaki
  9. Understanding the 30 year Decline in Business Dynamism: a General Equilibrium Approach By Benjamin Pugsley; Aysegul Sahin; Fatih Karahan
  10. Making Do with What You Have: Conflict, Firm Performance and Input Misallocation in Palestine By Francesco Amodio; Michele Di Maio
  11. Credit Scarcity in Developing Countries: an Empirical Investigation using Brazilian Firm-Level Data By André Albuquerque de Sant’Anna; Antônio Marcos Hoelz Pinto Ambrozio; Filipe Lage de Sousa; João Paulo Martin Faleiros
  12. Decentralised Random Competitive Dynamic Market Processes By Satoru Fujishige; Zaifu Yang
  13. Exploring the configuration of innovation-based supply chains By Sabri, Yasmine; Nuur, Cali; Micheli, Guido J.L.
  14. Do exporting firms benefit from retail internationalization? Evidence from France By Angela Cheptea; Charlotte Emlinger; Karine Latouche
  15. The Role of Credit in Predicting US Recessions By Harri Pönkä
  16. The role of imports for exporter performance in Peru By Pierola Castro,Martha D.; Fernandes,Ana Margarida; Farolec,Thomas
  17. Asymmetric information in a search model with social contacts By Stupnytska, Yuliia

  1. By: Bjuggren, Per-Olof (The Ratio institute and Jönköping School of Economics.); Nordström, Louise (; Palmberg, Johanna (Entreprenörskapsforum and Royal School of Technology (KTH))
    Abstract: Female leadership is an expanding area of research. It is a popular topic discussed frequently in both academia and in the popular press. Despite this, comparative studies of the impact of female leadership on firm level performance between family and non-family firms are rare. The present study has the ambition to fill this gap. This paper investigates female leadership in family firms and how it affects firm profitability. A unique database of ownership and leadership in private Swedish firms makes it possible to analyze difference in firm performance due to female leadership in family and non-family firms. Even though much has been written regarding the role of women in family firms we do not know so much about how female leadership in family firms affect the profitability of the firm. The analysis indicates that female leadership makes much more of a positive difference for performance in family firms. The effect is negative in non-family firms.
    Keywords: Family firms; Female Representation; Financial Performance
    JEL: G34 J31 L25
    Date: 2015–11–10
  2. By: Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino A
    Abstract: We study the equilibrium determinants of firm-level heterogeneity in a model in which firms can affect the variance of their productivity draws at the entry stage and explore the implications in closed and open economy. By allowing firms to choose the size of their investment in innovation projects of unknown quality, the model yields a Pareto distribution for productivity with a shape parameter that depends on industry-level characteristics. A novel result is that export opportunities, by increasing the payoffs in the tail, induce firms to invest in bigger projects with more spread-out outcomes. Moreover, when more productive firms also pay higher wages, trade amplifies wage dispersion by making all firms more unequal. These results are consistent with new evidence on how firm-level heterogeneity and wage dispersion vary in a panel of U.S. industries. Finally, we use patent data across U.S. states and over time to provide evidence in support of a specific mechanism of the model, namely, that export opportunities increase firm heterogeneity by fostering innovation.
    Keywords: firm heterogeneity; international trade; productivity dispersion; wage inequality
    JEL: E24 F12 F16
    Date: 2015–11
  3. By: Peter Michaelis (University of Augsburg, Department of Economics); Thomas Ziesemer (University of Augsburg, Department of Economics)
    Abstract: We consider a two-periods-model of differentiated duopoly. Firms produce an en-ergy consuming household durable differentiated by its energy efficiency. Consumers differ by the weight they apply to their future energy costs when deciding which product to buy. In line with the Japanese Top Runner Program, the regulator introduces a minimum efficiency standard in period t=2 which is fixed according to the efficiency of the product supplied by the high efficiency firm in t=1. We show that in t=1 both firms supply lower efficiency products and the high efficiency firm gains in market share and profits. In t=2 these effects are reversed. Calculated over both periods, total energy consumption does not change. Although there is no ecological effect, total welfare increases because price competition becomes tighter and the cost savings accruing to the consumers exceed the firms’ losses in profits.
    Keywords: energy efficiency standards, product differentiation, duopoly, regulation
    JEL: L13 Q48 Q58
    Date: 2015–11
  4. 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: 2015–08
  5. By: Fochmann, Martin; Haak, Marcel
    Abstract: We investigate the strategic decision making of audit firms in a tendering process. In particular, we are interested in how audit firms behave to acquire audit clients and which audit quality is ensured. Our main findings are manifold. First, if two big audit firms are competing, we do not observe that each firm tries to acquire all clients. However, if one big and one small audit firm are competing, we find evidence that the big audit firm generally apply strategies to acquire all available clients. In contrast, the small audit firm uses a clear "Guerilla Strategy" which means that the firm concentrates only on few clients whereas the other clients are almost ignored. Second, small audit firms are better off if more clients do exist in the tendering process. Thus, the legislator should ensure that more audit clients are tendered if the competitiveness of smaller audit firms should be enhanced. Third, in a situation in which the competitive advantage of big audit firms increases over-proportionally, we do not observe that big audit firms are able to decrease the market share of small audit firms markedly or are even able to push small audit firms out of the market. Fourth, we find that the quality level of an audit is higher if the client is acquired by a small audit firm. This implies that increasing the number of smaller audit firms could increase the quality level of the audit market.
    Keywords: tendering process,behavioral accounting,experimental economics
    JEL: M42 C91
    Date: 2015
  6. By: Chrysovalantou Miliou (Department of Economics, Universidad Carlos III de Madrid, Calle Madrid 126, Getafe (Madrid)); Emmanuel Petrakis (Department of Economics, University of Crete, Greece)
    Abstract: We study vertical integration taking into account the fact that, by facilitating the exchange of information within the integrated firm, it allows its upstream unit to disclose to the non-integrated downstream customer-rival the knowledge that it acquires regarding its downstream partner's innovation. We show that a vertically integrated firm chooses to disclose its knowledge to its downstream rival. Knowledge disclosure intensifies downstream competition but, at the same time, expands the size of the downstream market. We also show that, due to knowledge disclosure, vertical integration increases firms' innovation incentives, consumer and total welfare, and decreases, instead of raises, the rival's cost.
    Keywords: vertical integration; R&D investments; market foreclosure; knowledge disclosure
    JEL: L13 L22 L42
    Date: 2015–11–17
  7. By: Dirk Jenter; Fadi Kanaan
    Abstract: This paper shows that CEOs are fired after bad firm performance caused by factors beyond their control. Standard economic theory predicts that corporate boards filter out exogenous industry and market shocks from firm performance before deciding on CEO retention. Using a hand-collected sample of 3,365 CEO turnovers from 1993 to 2009, we document that CEOs are significantly more likely to be dismissed from their jobs after bad industry and, to a lesser extent, after bad market performance. A decline in industry performance from the 90th to the 10th percentile doubles the probability of a forced CEO turnover.
    JEL: F3 G3
    Date: 2015–10
  8. By: JINJI Naoto; SAKAMOTO Hiroaki
    Abstract: Using Japanese firm-level data, we investigate the firm-level relationship between export status and environmental performance in terms of carbon dioxide (CO₂) emissions intensity and energy intensity. As in previous studies, we first find that exporting firms have significantly lower CO₂ emissions/energy intensity. We then investigate the effects of exporting on CO₂ emissions/energy intensity by employing the propensity score matching (PSM) method, and find that the effects significantly vary across industries. Whereas exporting significantly improves environmental performance in most industries, exporting actually increases CO₂ emissions/energy intensity in the iron & steel industry. This finding suggests that the effect of exporting varies across industries.
    Date: 2015–11
  9. By: Benjamin Pugsley (Federal Reserve Bank of New York); Aysegul Sahin (Federal Reserve Bank of New York); Fatih Karahan (Federal Reserve Bank of New York)
    Abstract: Recent empirical work has drawn attention to an unmistakable shift in U.S. firm dynamics since the late 1970s. Principally, the entry rate, measured as the share of new employer firms out of all employer firms, declined by nearly 40 percent from 1977 to 2007, even before the impact of the Great Recession. Remarkably, this steady decline occurred relatively uniformly within geographic areas and within relatively narrow industry aggregations. Taking this trend decline or startup deficit as given, Pugsley and Sahin (2014) show that both its direct effect on business formation and its indirect cumulative effect through a shift in the employer age distribution partly explain the emergence of slower employment recoveries with each business cycle. An important question is what explains this apparent decline in business dynamism? Understanding the source or sources of the decline are crucial to understand whether it is an efficient response to technological shifts or escalating misallocation from increases, for example, in the costs of starting or running a business. In this paper we provide the first, to our knowledge, quantitative analysis of the set of factors that may have affected business dynamism. Our results are surprising. Rather than signicant changes in fixed and entry costs on the firm side, we find that a shift in the growth rate of the working age population that begins in the late 1970s and its general equilibrium effect on labor supply drives the bulk of the declines along the entry margin. To reach this conclusion, we consider a variety of potential explanations in partial and general equilibrium. The first set of factors that might shift business formation are related to changes in barriers to entry and changes in fixed and variable operating costs. Changes in laws and regulations, market concentration, education and licensing requirements, and shifts in economies of scale might discourage firm entry by creating higher barriers to enter and/or a higher fixed cost of operating. The second set of factors we consider is related to demographic changes. There are various reasons through which the population growth rate can affect business formation. Most directly, an older population might be associated with a lower rate of business formation in the economy if younger workers are more likely to engage in entrepreneurial activity. Changes in population growth also affect the labor supply, which could have important effects on business formation through a general equilibrium channel. In all of these cases, but especially for the general equilibrium effects it is important to differentiate between the effects on incumbent firms and the effects on potential entrants. Shocks to the labor supply that put downward pressure on wages create incentives for incumbent firms to expand, but they also create opportunities for potential entrants. Any effect on the entrant share will depend on how the shocks to the labor supply are accommodated by expanding incumbents and new firms. We first evaluate the importance of these two sets of factors exploiting pooled cross-state variation in firm entry rates. In particular, we estimate a simple linear regression using OLS and document a strong correlation between the growth rate of working age population and changes in the firm entry rate at the state level, controlling for state and time fixed eects. We also instrument for the variation in the age composition with lagged birthrates and find a startup rate semi-elasticity of roughly 1 to 1.5. Given that the growth rate of working age population went down from around 2% in early 1980s to slightly above 1% by 1990s, this estimate suggests that more than half of the decline in the start-up rate can be explained by the decline in the growth rate of working age population. The second part of our empirical analysis focuses on various regulatory and policy changes, which is still in progress. While the regression based results are informative, they fail to provide us an internally consistent composition of the factors we considered. In addition, it is not possible to have aggregate time-consistent measures of the type of frictions that affect entry costs and fixed costs. To alleviate this problem, the second part of our analysis follows a more structural approach and estimate a variant of the Hopenhayn and Rogerson (1993) model with population growth to evaluate the quantitative importance of different sets of explanations. Since the model has implications for many other measures of firm dynamics, such as average firm size, survival rates, and employment growth rates, it allows for a more complete evaluation of alternative channels. Before we move on to estimating the model, we analyze the time variation along these additional dimensions. Interestingly, we find that despite the gradual decline in the firm entry rate, survival and employment growth rates by firm size remained stable since 1980s. These facts help us discipline the model and measure the contributions of various shifts in the economy to the decline in startup rates. The estimation of the model is still work in progress but we present comparative statics from the model. Our preliminary findings show that the measured declines in business formation are the optimal response to a shift in the growth rate of the population. Our paper is closely related to the emerging literature on the declining dynamism in the U.S. economy. Early work by Reedy and Strom (2012) first called attention to a decline in the aggregate entry rate of new employers. Using more disaggregated data, recent papers by Pugsley and Sahin (2014), Decker, Haltiwanger, Jarmin, and Miranda (2014a), Hathaway and Litan (2014), Gourio, Messer, and Siemer (2014) and Davis and Haltiwanger (2014) all document that these declines in the entry rate are pervasive within geographic areas and relatively narrow industry aggregations. All of these papers have also drawn attention to the relevance of this decline for the ongoing health in labor market. We are the first, to our knowledge, to provide cross-sectional and time-series evidence on the determinants of the declining entry rate. Specifically, we identify the principal role of shifting demographics on the equilibrium quanitity of startup activity, which is also consistent with the predictions of the workhorse model of industry dynamics.
    Date: 2015
  10. By: Francesco Amodio (Universitat Pompeu Fabra); Michele Di Maio (University of Naples)
    Abstract: This paper investigates the effect of conflict on firms' output value and input misallocation in the context of Palestine during the Second Intifada. Using a unique establishment-level dataset, we compare firms' outcomes and input usage over time across districts experiencing differential changes in conflict intensity. We show how conflict diminishes the total and per-worker value of firms' output through the distortions it generates in firms' access to input markets. In particular, lack of access to the market for imported material inputs leads firms to adjust input usage accordingly, substituting domestically produced materials for imported ones. We also empirically identify the relative amount of conflict-induced input distortions. Furthermore, we find that conflict affects dis-proportionally more those sectors which were more intensive in imported materials and had higher average output value in pre-conflict years. Conflict is thus shown to be particularly harmful for the most productive sectors of the economy.
  11. By: André Albuquerque de Sant’Anna (Brazilian Development Bank); Antônio Marcos Hoelz Pinto Ambrozio (Brazilian Development Bank); Filipe Lage de Sousa (Brazilian Development Bank); João Paulo Martin Faleiros (Brazilian Development Bank)
    Abstract: The aim of this paper is investigating whether Brazilian industrial firms are credit constraint. We exploit a rich database that contains more than 3.000 firms with characteristics that may affect their degree of credit constraints: size, being listed in the Brazilian stock market and level of exports-sales ratio. Our results show that all dimensions considered here may affect the sensitiveness of in-vestment to cash flow, i.e., large firms, stock market listed companies as well as large export capac-ity are associated with inexistence or less credit restriction. Specifically, considering firm’s size, our results corroborate the economic theory prediction and empirical international literature. However, when compared to Brazilian studies, our findings are similar to Terra (2003), however, they differ from Aldrighi and Bisinha (2010) evidences that are based only on listed firms. Furthermore, the in-fluence of being listed in the stock market and export capacity is beyond any possible correlation with size. Even small and middle firms are not credit constraint when listed in the stock market or when the exports-sales ratio is higher.
    Keywords: Credit Constraint, Firm’s Investment, Cash Flow, Exports, Stock Market
    JEL: D92 E22
  12. By: Satoru Fujishige; Zaifu Yang
    Abstract: We study a decentralised and uncoordinated market where heterogeneous self-interested firms and workers meet directly and randomly in pursuit of higher payoff over time. Each firm hires several workers and each worker has preferences over firms and salaries, taking at most one job. Neither firms nor workers possess perfect knowledge of the market. At any time any firm and any group of workers can form a new coalition if doing so makes no member of the coalition worse off and at least one member strictly better off. In this process, the firm may recruit workers from other firms and dismiss some of its own workers, the deserted firms and red workers can be worse off. This process is called the coalition improvement. We establish that starting from an arbitrary market state of a matching between firms and workers with a system of salaries, a decentralised random dynamic market process where each possible coalition improvement occurs with a positive probability converges with probability one to a competitive equilibrium, provided that an equilibrium exists. This theorem is built upon a crucial mathematical result which shows the existence of a nite sequence of successive coalition improvements from an arbitrary market state to equilibrium. Our results also have meaningful policy implications.
    Keywords: Decentralised market, labour market, random dynamic process, competitive equilibrium, spontaneous market process, indivisibility.
    JEL: C62 C68 D02 D44
    Date: 2015–10
  13. By: Sabri, Yasmine (Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm, Sweden, & Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Milan, Italy); Nuur, Cali (Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm); Micheli, Guido J.L. (Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Milan, Italy)
    Abstract: Physical supply chains are the medium where innovation practices are usually implemented, whether in the case of introducing new products/processes, or when improving existing designs of products/processes, radically or incrementally. Thus, process and product innovation practices have become an integral part of decisions relating to the management and design of supply chains. This study investigates how innovation implementation is a cornerstone in the decision making process of supply chain configuration. Furthermore, it examines how this relation is manifested with respect to performance. The paper explores the configuration profiles of two major manufacturers based in Italy and Sweden, with globally designed upstream and downstream chains, demonstrating the differences and similarities, while investigating the innovation practices within each firm. The paper draws conclusions on the relation between innovation implementation and supply chain management, in addition to configuration and re-configuration decision making process.
    Keywords: Supply Chain Configuration; Innovation practices; Performance
    JEL: L25 O32
    Date: 2015–11–18
  14. By: Angela Cheptea; Charlotte Emlinger; Karine Latouche
    Abstract: This paper questions the impact of the globalization of the retail sector on the export activity of origin country agrifood firms. In a previous paper (Cheptea et al. 2015), we showed that the overseas expansion of a country's retailers fostered its exports to foreign markets. This effect can be explained by a reduction in trade costs for retailers' supplying firms in the origin country, or to a change in consumer preferences in the host country that benefits all origin country firms. In this paper, we evaluate which of the two mechanisms dominates. For that, we use an original firm-level database of French agri-food exports, identifying the domestic suppliers of French retailers through certification with the private IFS standard. We find that IFS certified French firms are more likely to export and export larger volumes than non-certified firms to markets where French retailers established outlets. We also show that when French retailers close down their activities in a market, IFS firms face a drop in exports to this market in the subsequent years. The results are robust to the use of different sets of firm- and country-specific fixed effects, are unaffected by possible selection and endogeneity biases, and by the presence in export markets of other retailers. The difference in behavior for certified and non-certified exporting firms on markets where French retailers operate confirms the trade cost advantage of retailers' suppliers, which is lost when French retailers exit from the destination country.
    Keywords: Multinational retailers;Firm-level exports;Private standards
    JEL: F12 F14 F23
    Date: 2015–11
  15. By: Harri Pönkä (University of Helsinki and CREATES)
    Abstract: We study the role of credit in forecasting US recession periods with probit models. We employ both classical recession predictors and common factors based on a large panel of financial and macroeconomic variables as control variables. Our findings suggest that a number of credit variables are useful predictors of US recessions over and above the control variables both in and out of sample. Especially the excess bond premium, capturing the cyclical changes in the relationship between default risk and credit spreads, is found to be a powerful predictor. Overall, models that combine credit variables, common factors, and classic recession predictors, are found to have the best forecasting performance.
    Keywords: Business cycle, Credit Spread, Factor models, Forecasting, Probit models
    JEL: C22 C25 E32 E37
    Date: 2015–11–08
  16. By: Pierola Castro,Martha D.; Fernandes,Ana Margarida; Farolec,Thomas
    Abstract: Using highly disaggregated firm-level customs transaction data for imports and exports in Peru over the 2000?2012 period, this paper explores the relationship between imports of intermediate inputs and firm export performance. The paper shows that greater use, variety, and quality of imported intermediate inputs is significantly correlated with higher exports, faster export growth, greater diversification of export markets, and higher quality exports (as measured by relative unit prices) at the firm level. This relationship is robust and persistent to controls for unobserved firm heterogeneity and year fixed effects. The use of imported inputs is also associated with higher productivity at the firm level. Considering the relationship between specific trade policy measures and the import performance of those exporters that are direct importers, the analysis shows that those exposed to higher tariffs and nontariff measures import less in total and exhibit lower import variety. The use of the advanced clearance procedure as the modality to clear customs for imports is favorable to the import performance of exporter-importers, in that the users of the modality import more and import a more diversified bundle of inputs than those that do not use it, even after controlling for firm size.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Debt Markets,Currencies and Exchange Rates
    Date: 2015–11–13
  17. By: Stupnytska, Yuliia (Center for Mathematical Economics, Bielefeld University)
    Abstract: In this paper, the search model is proposed, in which homogeneous firms are uncertain about the job seekers' number of friends, who can help them in the job search (social capital). All workers have the same productivity and differ only in the social capital. A firm offers a take-it-or-leave-it wage contract to a worker after checking the worker's profile and her public number of non-fictitious social contracts in the Social Network System in the Internet. This number serves as a noisy signal of the social capital for firms and cannot be influenced by the worker only for signalling purpose. The model generates a positive relationship between the number of contacts in the Social Network System and the wage offered by firms in the equilibrium. In addition, the presence of firm's uncertainty with respect to workers' possibilities to find jobs through social contacts increases overall social welfare.
    Keywords: social welfare, wage dispersion, wage contract, Linkedin, Facebook, Social Network System, uncertainty, social capital, asymmetric information
    Date: 2015–11–10

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