nep-bec New Economics Papers
on Business Economics
Issue of 2015‒12‒28
seventeen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Where Has All The Skewness Gone? The Decline In High-Growth (Young) Firms In The U.S. By Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
  2. Business Cycle Dynamics and Firm Heterogeneity. Evidence for Austria Using Survey Data By Jürgen Bierbaumer-Polly; Werner Hölzl
  3. Learning Entrepreneurship From Other Entrepreneurs? By Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi
  4. Business Networks and Crisis Performance: Professional, Political, and Family Ties By Richard W. Carney; Travers Barclay Child
  5. Job Creation, Small vs. Large vs. Young, and the SBA By J. David Brown; John S. Earle; Yana Morgulis
  6. E-Skills, Brains And Performance Of The Firms: ICT And Ability Of Firms To Conduct Successful Projects In Luxembourg By Anissa Chaibi; Adel Ben Youssef; Leila Peltier-Ben Aoun
  7. Firm Dynamics in the Neoclassical Growth Model By Omar Licandro
  8. The Impact of 'A - Day' on Executive Pensions and Pay for Performance By Damon Morris; Ian Gregory-Smith; Brian Main; Alberto Montagnoli; Peter Wright
  9. Do Wealth Shocks Affect Health? New Evidence from the Housing Boom By Eleonora Fichera; John Gathergood
  10. Productivity and Organization in Portuguese Firms By Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
  11. Global Collaborative Patents By Sari Pekkala Kerr; William R. Kerr
  12. Training and Search On the Job By Rasmus Lentz; Nicolas Roys
  13. Innovation Capabilities and Financing Constraints of Family Firms By Schäfer, Dorothea; Stephan, Andreas; Mosquera, Jenniffer Solórzano
  14. The Government as a Large Shareholder: Impact on Firm Value and Corporate Governance By Marcelo Fernandes; Walter Novaes
  15. Agency Business Cycles By Mikhail Golosov; Guido Menzio
  16. Innovation Capabilities and Financing Constraints of Family Firms By Dorothea Schäfer; Andreas Stephan; Jenniffer Solórzano Mosquera
  17. The robustness of industrial commodity oligopoly pricing strategies By David M. Newbery and Thomas Greve

  1. By: Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
    Abstract: The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. The reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.
    JEL: E24 J63 L26
    Date: 2015–12
  2. By: Jürgen Bierbaumer-Polly (WIFO); Werner Hölzl (WIFO)
    Abstract: We study the (macroeconomic) consistency of individual firm-level business tendency survey responses and take firm-level heterogeneity explicitly into account. Adding firm-level, industry- and region-specific structural characteristics allows controlling for additional microeconomic heterogeneity. The dataset we use are the business tendency survey micro data for Austrian manufacturing covering the time period 1996 to 2012. Our results show that firm-specific information embedded in the qualitative survey questions is relevant to understand aggregate business cycle dynamics. For example, the assessment of firms' order book levels, their current degree of capacity utilisation and their production expectations as well as obstacles in their production activities due to insufficient demand show evidence of a significant effect in explaining a firm's change in current production output. However, we do not find clear results with respect to firm size, nor do we find explanatory power of the industry affiliation of a firm and with respect to regional characteristics. We are able to identify heterogeneity in behaviour for cyclical up- and downswings as well as between large and small firms.
    Keywords: business cycle, business tendency surveys, firm-level expectations, ordered probit
    Date: 2016–12–16
  3. By: Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi
    Abstract: We document that individuals who grew up in areas with high density of firms are more likely, as adults, to become entrepreneurs, controlling for the density of firms in their current location. Conditional on becoming entrepreneurs, the same individuals are also more likely to be successful entrepreneurs, as measured by business income or firm productivity. Strikingly, firm density at entrepreneur’s young age is more important than current firm density for business performance. These results are not driven by better access to external finance or intergenerational occupation choices. They are instead consistent with entrepreneurial capabilities being at least partly learnable through social contacts. In keeping with this interpretation, we find that entrepreneurs who at the age of 18 lived in areas with a higher firm density tend to adopt better managerial practices (enhancing productivity) later in life.
    JEL: J24 M13 R11
    Date: 2015–12
  4. By: Richard W. Carney (Australian National University, Australia); Travers Barclay Child (VU University Amsterdam, the Netherlands)
    Abstract: Do political ties, family-business group affiliation, and professional connections collectively matter for firm performance? By exploiting a new dataset for 1,290 large East Asian firms during the 2008 financial crisis, we offer a holistic comparison of these different networks. We find that professional networks buoyed performance; political and family networks did not. This suggests information access is a key benefit of business networks. A one standard deviation improvement to a firm's professional network position cushioned quarterly ROA by 2/5 of a percentage point during the crisis.
    Keywords: networks; political connections; interlocking directorates; family ownership; corporate governance
    JEL: G3 G14 L14
    Date: 2015–12–18
  5. By: J. David Brown; John S. Earle; Yana Morgulis
    Abstract: Analyzing a list of all Small Business Administration (SBA) loans in 1991 to 2009 linked with annual information on all U.S. employers from 1976 to 2012, we apply detailed matching and regression methods to estimate the variation in SBA loan effects on job creation and firm survival across firm age and size groups. The number of jobs created per million dollars of loans generally increases with size and decreases in age. The results imply that fast-growing firms (“gazelles”) experience the greatest financial constraints to growth, while the growth of small, mature firms is least financially constrained. The estimated association between survival and loan amount is larger for younger and smaller firms facing the “valley of death”.
    JEL: H81
    Date: 2015–11
  6. By: Anissa Chaibi (IPAG Business School, Paris - GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique); Adel Ben Youssef (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique); Leila Peltier-Ben Aoun (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper provides original empirical evidence on the causal links between e-skills, usage of Information and Communication Technologies (ICT) and firm's performance using a sample of Luxembourgian manufacturing and services firms. Firm performance is measured in terms of innovation (success of new projects settled). Our main findings are: (i) there's no relationship between the absorptive technology capacity of the firm (measured by ICT staff and Training) and the probability of the implementation of successful ICT projects, (ii) there is a positive effect of e-applications usage (ICT usage) on the probability of the implementation of successful new projects, and (iii) there is an asymmetric effect of usage of e-commerce and e-administration confirming findings of the recent literature
    Keywords: Innovative projects,Ordered models,Innovation,Usage of ICT,Depth of ICT adoption
    Date: 2015–05–01
  7. By: Omar Licandro
    Abstract: This paper integrates firm dynamics theory into the Neoclassical growth framework. It embeds selection into an otherwise standard dynamic general equilibrium model of one good, two production factors (capital and labor) and competitive markets. Selection relies on firm specific investment: i) capital is a fixed production factor {an entry cost, ii) the productivity of capital is firm specific, but observed after investment, iii) firm specific capital is partially reversible {its opportunity cost plays the same role as fixed production costs. At equilibrium, aggregate technology is Neoclassical, but TFP is endogenous and positively related to selection; capital depreciation positively depends on selection too, due to capital irreversibility. The Neoclassical model is the limit case of homogeneous firms. At steady state, output per capita and welfare both raise with selection. Rendering capital more reversible or increasing the variance of the idiosyncratic shock both raise selection, productivity, output per capita and welfare.
    Keywords: Firm dynamics, Selection, Neoclassical Growth model, Scrapping, Capital irreversibility
    Date: 2015
  8. By: Damon Morris (Department of Economics, University of Sheffield); Ian Gregory-Smith (Department of Economics, University of Sheffield); Brian Main (Business School, University of Edinburgh); Alberto Montagnoli (Department of Economics, University of Sheffield); Peter Wright (Department of Economics, University of Sheffield)
    Abstract: This paper evaluates the impact of the ‘A-day’ pensions simplification legislation introduced in the UK in 2006. This reform exogenously affected the cost of pension provision for firms whose executives had accumulated pensions benefits in excess of the prescribed limit. We find a strong reaction in the form of pension provision in a sample of UK executive directors. After A-day, many executives saw their defined benefit scheme replaced with supplementary cash payments. This had the unintended consequence of significantly decreasing the relationship between executive pay and firm performance for those executives affected by the reform.
    Keywords: Executive compensation; Executive pensions; Pay for Performance; A-day
    JEL: J32 J33 M12 M52
    Date: 2015–12
  9. By: Eleonora Fichera; John Gathergood
    Abstract: We exploit wealth shocks arising from housing wealth gains to examine the relationship between wealth and health. In UK household panel data positive housing wealth gains lower the likelihood of home owners exhibiting a range of non-chronic health conditions with no effect on renters. For owners housing wealth gains change health behaviours: increasing use of private health care, reducing hours of work (especially for women) and increasing time dedicated to exercise. Housing wealth gains, unlike income gains, do not increase risky health behaviours such as smoking and drinking. Furthermore, house prices highly pro-cyclical. The positive health effects of housing wealth gains on home owner health over the business cycle offset the negative health effects of labour market conditions and work intensity.
    Keywords: health, wealth, housing wealth, house prices
    Date: 2015
  10. By: Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
    Abstract: The productivity of firms is, at least partly, determined by a firm's actions and decisions. One of these decisions involves the organization of production in terms of the number of layers of management the firm decides to employ. Using detailed employer-employee matched data and firm production quantity and input data for Portuguese firms, we study the endogenous response of revenue-based and quantity-based productivity to a change in layers: a firm reorganization. We show that as a result of an exogenous demand or productivity shock that makes the firm reorganize and add a management layer, quantity based productivity increases by about 4%, while revenue-based productivity drops by more than 4%. Such a reorganization makes the firm more productive, but also increases the quantity produced to an extent that lowers the price charged by the firm and, as a result, its revenue-based productivity.
    JEL: D22 D24 F16 J24 J31 L23
    Date: 2015–12
  11. By: Sari Pekkala Kerr; William R. Kerr
    Abstract: We study the prevalence and traits of global collaborative patents for U.S. public companies, where the inventor team is located both within and outside of the United States. Collaborative patents are frequently observed when a corporation is entering into a new foreign region for innovative work, especially in settings where intellectual property protection is weak. We also connect collaborative patents to the ethnic composition of the firm's U.S. inventors and cross-border mobility of inventors within the firm. The inventor team composition has important consequences for how the new knowledge is exploited within and outside of the firm.
    JEL: F02 F22 F23 J15 O19 O31 O32 O33 O34
    Date: 2015–11
  12. By: Rasmus Lentz; Nicolas Roys
    Abstract: The paper studies human capital accumulation over workers' careers in an on the job search setting with heterogenous firms. In renegotiation proof employment contracts, more productive firms provide more training. Both general and specific training induce higher wages within jobs, and with future employers, even conditional on the future employer type. Because matches do not internalize the specific capital loss from employer changes, specific human capital can be over-accumulated, more so in low type firms. While validating the Acemoglu and Pischke (1999) mechanisms, the analysis nevertheless arrives at the opposite conclusion: That increased labor market friction reduces training in equilibrium.
    JEL: D21 D43 D83 E24 J24 J31 J33 J41 J62 J63 J64
    Date: 2015–11
  13. By: Schäfer, Dorothea (DIW Berlin and CeFEO at Jönköping International Business School); Stephan, Andreas (Jönköping International Business School and CESIS at KTH Stockholm); Mosquera, Jenniffer Solórzano (Jönköping International Business School)
    Abstract: Using the 2007 Mannheim innovation survey, we investigate whether family firms are more financially constrained than other firms and how this affects both innovation input as well as innovation outcomes such as market and firm novelties or process innovations. Based on the CDM framework, estimation of the recursive system of equations shows that family businesses are more likely to be constrained and have, on average, lower innovation input. Surprisingly, however, this does not reduce their innovation outcomes as, on average, family firms have the same level of innovation outcomes as nonfamily firms.
    Keywords: Innovation; Capability; Financing Constraints; Family Firms; CDM
    JEL: D30 G32 O32
    Date: 2015–12–18
  14. By: Marcelo Fernandes (Queen Mary University of London and Sao Paulo School of Economics, FGV); Walter Novaes (PUC-Rio)
    Abstract: The subprime crisis led to a wave of government interventions in the private sector that has been particularly strong in Europe and Latin America, where several governments are large shareholders in a variety of public firms. In a sense, the subprime crisis induced these governments to behave as active large shareholders. This paper uses a sample of public firms in Brazil to show that government activism lowers the value of minority shareholders' voting rights. While the corporate governance literature usually associates lower voting premia with stronger protection of minority shareholders, we provide evidence that the government-induced decline in the value of voting rights harmed minority shareholders in Brazil.
    Keywords: Interventionism, Monitoring, Private benefits, Voting premium
    JEL: G14 G18 G30 G38
    Date: 2015–12
  15. By: Mikhail Golosov; Guido Menzio
    Abstract: We propose a new business cycle theory. Firms need to randomize over firing or keeping workers who have performed poorly in the past, in order to give them an ex-ante incentive to exert effort. Firms have an incentive to coordinate the outcome of their randomizations, as coordination allows them to load the firing probability on states of the world in which it is costlier for workers to become unemployed and, hence, allows them to reduce overall agency costs. In the unique robust equilibrium, firms use a sunspot to coordinate the randomization outcomes and the economy experiences endogenous, stochastic aggregate fluctuations.
    JEL: D86 E24 E32
    Date: 2015–11
  16. By: Dorothea Schäfer; Andreas Stephan; Jenniffer Solórzano Mosquera
    Abstract: Using the 2007 Mannheim innovation survey, we investigate whether family firms are more financially constrained than other firms and how this affects both innovation input as well as innovation outcomes such as market and firm novelties or process innovations. Based on the CDM framework, estimation of the recursive system of equations shows that family businesses are more likely to be constrained and have, on average, lower innovation input. Surprisingly, however, this doesnot reduce their innovation outcomes as, on average, family firms have the same level of innovation outcomes as nonfamily firms.
    Keywords: Innovation, Capability, Financing Constraints, Family Firms, CDM
    JEL: G32 O32
    Date: 2015
  17. By: David M. Newbery and Thomas Greve
    Abstract: Industrial commodity markets are typically oligopolies in which firms set prices but need to make sunk and durable investment decisions, requiring them to make predictions of future prices. Mark-up pricing models are attractive both for setting prices and predicting future prices for investment analysis. Simple algorithms can find Nash equilibria, but these equilibria are not necessarily robust. This paper examines fixed and proportional mark-up models and demonstrates that they are robust to single firm Nash Cournot deviations but not against more sophisticated deviations in the deterministic case. Cournot equilibria are not robust under demand uncertainty, where proportional mark-up models emerge as the most robust when marginal costs are increasing.
    Keywords: market modelling, mark-up equilibria, robustness, oligopoly
    JEL: C63 C73 D43 L10 L13 L94
    Date: 2015–12–18

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.