nep-bec New Economics Papers
on Business Economics
Issue of 2016‒02‒12
fifteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Aggregate Hiring and the Value of Jobs Along the Business Cycle By Yashiv, Eran
  2. An encompassing model & test of the Evans-Jovanovic credit constraints hypothesis By Jean Bonnet; Robert Cressy
  3. Wage dispersion and technology: A firm-level analysis on European data By Valeria Cirillo; Matteo Sostero; Federico Tamagni
  4. When The Threat Is Stronger Than The Execution: Trade Liberalization And Welfare Under Oligopoly By Peter Neary; Dermot Leahy
  5. The role of start-ups in structural transformation By Dent, Robert C.; Karahan, Fatih; Pugsley, Benjamin; Sahin, Aysegul
  6. Trade, wages, and collective bargaining By Denis Fougere; Erwan Gautier; Juan Carluccio
  7. ENVIRONMENTAL RISKS A ND REGIONAL COMPETITIVENESS: BRIDGING THE CONCEPTUAL GAP (International Conference "Recent Advances in Economic and Social Research", 13-14 mai 2015, București) By Catrinel COTAE
  8. The Micro Origins of International Business Cycle Comovement By di Giovanni, Julian; Levchenko, Andrei A.; Mejean, Isabelle
  10. Innovation Strategies and Firm Growth By Stefano Bianchini; Gabriele Pellegrino; Federico Tamagni
  11. The Contingent Effect of Management Practices By Blader, Steven; Gartenberg, Claudine; Prat, Andrea
  12. Oriflame CIS: The Successful Evolution of a Regional Subsidiary’s Mandate By Igor Gurkov
  13. Unraveling Firms: Demand, Productivity and Markups Heterogeneity By Forlani, Emanuele; Martin, Ralf; Mion, Giordano; Muûls, Mirabelle
  14. From Knowledge to Innovation Economy: Developing Education and Creating Entrepreneurial Ecosystems By Jean Bonnet
  15. Old before their time: The role of employers in retirement decisions By Bello, Piera; Galasso, Vincenzo

  1. By: Yashiv, Eran
    Abstract: U.S. CPS data indicate that in recessions firms actually increase their hiring rates from the pools of the unemployed and out of the labor force. Why so? The paper provides an explanation by studying the optimal recruiting behavior of the representative firm. The model combines labor frictions, of the search and matching type, with capital frictions, of the q-model type. Optimal firm behavior is a function of the value of jobs, i.e., the expected present value of the marginal worker to the firm. These are estimated to be counter-cyclical, the underlying reason being the dynamic behavior of the labor share of GDP. The counter-cyclicality of hiring rates and job values, which may appear counter-intuitive, is shown to be consistent with well-known business cycle facts. The analysis emphasizes the difference between current labor productivity and the wider, forward-looking concept of job values. The paper explains the high volatility of firm recruiting behavior, as well as the reduction over time in labor market fluidity in the U.S., using the same estimated model. Part of the explanation has to do with job values and another part with the interaction of hiring and investment costs, both determinants having been typically overlooked.
    Keywords: aggregate hiring; business cycles; capital market frictions; job values; labor market fluidity; labor market frictions; vacancies; volatility
    JEL: E24 E32
    Date: 2016–01
  2. By: Jean Bonnet (CREM, UMR CNRS 6211, UFR SEGGAT, University of Caen Normandie, France); Robert Cressy (Birmingham Business School, UK)
    Abstract: Using an unbalanced panel of some 36,500 French startup firms and 11,600 closures over the period 1994-2000 we test for a role of bank credit scoring in small business lending using an encompassing version (GEJ) of the seminal Evans-Jovanovic(1989) (EJ) model of credit constraints. In the GEJ model the bank’s estimate of the probabilty of individual company survival (business quality) is allowed to figure in the startup credit decision, alongside collateral. On the French data EJ is rejected in favour of GEJ. Thus we conclude with EJ that there is evidence of startup credit constraints via bank lending rules, but that this imperfection is ameliorated by the bank’s estimate of firm quality: better firms and entrepreneurs are more likely to get loans. Enrepreneurial human capital is also found (consistently with Cressy, 1996) to play a major role in the survival of startup businesses and hence in the chances of getting a loan. Consistent with other empirical work we also establish that startup loan refusal (an upper bound to rationing) affects only a small proportion (9%) of applicants. However, for those whose loan request is rejected, dynamics show that they have a permanently higher hazard of failure (by 50%-90%), relative to their funded counterparts. Credit constraints thus contribute to small business failure.
    Keywords: Entrepreneurship, startups, credit constraints, survival, France, panel data, hazard rate
    JEL: L25 L26 G33
    Date: 2016–01
  3. By: Valeria Cirillo; Matteo Sostero; Federico Tamagni
    Abstract: Within-firm wage dispersion represents a relevant dimension of the overall wage inequality. A large stream of literature has analysed the wage-technology link without explicitly taking into account within-firm wage dispersion. In this work we aim to empirically investigate how technology affects within-firm wage dispersion and how it changes according to employer size. By exploiting employer-employee data from a survey of European firms (Eurostat's Structure of Earnings Survey - 2010) matched with information on sector innovation derived from the Community Innovation Survey, we look at the impact of innovation across small and medium-large firms, both on the average wages paid by firms and on the degree of within-firm wage inequality. Furthermore, we distinguish between high-paying and low-paying firms and more equal and unequal firms by means of a quantile regression approach.
    Keywords: wage inequalities, innovation, quantile regressions, employer-employee matched data
    Date: 2016–03–02
  4. By: Peter Neary; Dermot Leahy
    Abstract: Abstract: We compare trade liberalization under Cournot and Bertrand competition in reciprocal markets. In both cases, the critical level of trade costs below which the possibilityof trade affects the domestic firm's behavior is the same; trade liberalization increases trade volume monotonically; and welfare follows a U-shaped pattern. However, welfareis usually greater under Bertrand than Cournot competition, despite the fact that for higher trade costs the volume of trade is greater under Cournot competition. In general,there exists a “Nimzowitsch Region” in parameter space, where welfare is higher under Bertrand competition even though no actual trade takes place.
    Keywords: Cournot and Bertrand Competition, Cross-Hauling, Nimzowitsch Region,Oligopoly and Trade,Trade Liberalization
    JEL: F12 F13
    Date: 2015–12–31
  5. By: Dent, Robert C. (Federal Reserve Bank of New York); Karahan, Fatih (Federal Reserve Bank of New York); Pugsley, Benjamin (Federal Reserve Bank of New York); Sahin, Aysegul (Federal Reserve Bank of New York)
    Abstract: The U.S. economy has been going through a striking structural transformation—the secular reallocation of employment across sectors—over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, owing to sectors receiving shares of start-up employment that differ from their overall employment shares. The rest is mostly the result of life cycle differences across sectors. Declining overall entry has a small but growing effect of dampening structural transformation.
    Keywords: structural transformation; employment dynamics; sectoral reallocation
    JEL: E24 J00 J23 L25
    Date: 2016–01–01
  6. By: Denis Fougere (Observatoire sociologique du changement); Erwan Gautier (Université de Nantes); Juan Carluccio (University of Surrey (UNIS))
    Abstract: Collective bargaining modify the impact of exports and imports on wages? In a seminal paper, Calmfors and Driffill (1988) show that, in firms covered by firm‑level wage agreements, wages are better linked to productivity than in firms covered by industry‑level agreements. Gürtzgen (2009) lends support to these predictions using data for German manufacturing firms. Our study looks at data from individual French firms on wages, exports/imports and collective bargaining over the period 2005‑2009. Our sample comprises more than 8,000 firms (among the largest French exporters/importers) which account for over two thirds of French exports and imports of manufactured goods. Using micro‑econometric techniques, we examine two questions: (i) do exporting and offshoring lead to higher wages and, if so, is the effect heterogeneous across workers? (ii) to what extent does wage bargaining shape the effect of trade on wages? International trade favours exports but also creates opportunities for offshoring. This Rue de la Banque studies the impact of firm-level trade activities on wages, as well as the role of collective bargaining. Both exports and offshoring have a positive impact on wages, but exports increase wages for all occupational categories, while the impact of an increase in offshoring is stronger for executives. The elasticity of wages with respect to exports and offshoring is positive and is higher for firms with collective bargaining. However, we find that collective bargaining reduces only moderately wage inequalities induced by offshoring.
    Keywords: Wages; Micro‑econometric techniques; Firm-level trade activities; Collective bargaining
    Date: 2016–01
  7. By: Catrinel COTAE (PhD student, „Ion Mincu” University of Architecture and Urban Planning, Bucharest, Romania)
    Abstract: Given the controversial discourse characterising competitiveness, the article aims to present a different perspective regarding the quantification of regional performances. The challenge addressed here is that of a too extensive conceptual background that although characterised by pluri-perspectivism in approached, it is still not providing consistent evidence to define a clear connection between competitiveness levels and risk factors. Existing literature focuses on presenting complicated taxonomies for environmental risks, mitigation mechanisms partly addressing the worrisome trends of resource depletion and ecosystem erosion. In search for a method to include a new set of risk factors and in an attempt to identify which of those account for the economic stagnation or decline of a region in terms of competitiveness level, a conceptual clarification is needed. After reflecting on the existing perspectives in the field, a couple of prerequisites for a conceptual framework are provided, positing that environmental risk for the business level can be better understood conceptually at firm level and approached for operational purposes on a regional level. The study henceforth coagulates the conceptual links between environmental risks [ER] and the overall level of regional competitiveness providing insight on the corporate strategy dimensionality of sustainability and productive dependence. Subsequently, on one hand, it is possible to provide a set of key principles acting as building blocks for assessment purposes and on the other, to present an alternative conceptual construct.
    Keywords: environmental risks; regional performance; competitiveness; operational; mitigation.
    JEL: R11 R12 R58
    Date: 2015–12
  8. By: di Giovanni, Julian; Levchenko, Andrei A.; Mejean, Isabelle
    Abstract: This paper investigates the role of individual firms in international business cycle comovement using data covering the universe of French firm-level value added, bilateral imports and exports, and cross-border ownership over the period 1993-2007. At the micro level, controlling for firm and country effects, trade in goods with a particular foreign country is associated with a significantly higher correlation between a firm and that foreign country. In addition, foreign multinational affiliates operating in France are significantly more correlated with the source economy. The impact of direct trade and multinational linkages on comovement at the micro level has significant macro implications. Because internationally connected firms are systematically larger than non-internationally connected firms, the firms directly linked to foreign countries represent only 8% of all firms, but 56% of all value added, and account for 75% of the observed aggregate comovement. Without those linkages the correlation between France and foreign countries would fall by about 0.091, or one-third of the observed average business cycle correlation of 0.29 in our sample of partner countries. These results are evidence of transmission of business cycle shocks through direct trade and multinational ownership linkages at the firm level.
    Keywords: comovement; firm-level shocks; international trade; large firms
    JEL: F44
    Date: 2016–01
  9. By: Fernanda Ricotta (Dipartimento di Economia, Statistica e Finanza, Università della Calabria)
    Abstract: This paper investigates differences in productivity by destination market of firms exports. The total factor productivity (TFP) is used as measure of productivity. The productivity differences by export destination are estimated using multilevel approach considering the first destination country of the firm’s exports as the second level group of the model. The analysis is based on a dataset that provides comparable cross-country data of manufacturing firms in seven European countries (Austria, France, Germany, Hungary, Italy, Spain and the United Kingdom). The results are as follows. Productivity differs from market to market and, thus, it gives support to the expectations derived from Chaney’s model (2008). The estimates confirm that non-exporters are, on average, the less productive. On the contrary, the European firms that export to China and India register the highest positive difference. A positive difference also exists for firms that export to the USA and Canada. On the contrary, there is no relevant TFP difference for firms exporting to the EU-15 area. The difference is positive but slight for the Other Asian countries and Other EU countries, while it is negative for Other areas, Other non EU countries and Central and South America. Among firm-specific characteristics only size and sector membership help to explain the productivity differences by destination market and the role of size is by far the most dominant factor.
    Keywords: Productivity, Heterogeneous firms, Export, Market of destination, Multilevel model
    JEL: D22 F10 F14 C31
    Date: 2016–01
  10. By: Stefano Bianchini; Gabriele Pellegrino; Federico Tamagni
    Abstract: In this work, we explore the relations between sales growth and a set of innovation indicators that capture the different sources, modes and results of the innovative activity undertaken within firms. We exploit a rich panel on innovation activity of Spanish manufacturing firms, reporting detailed CIS-type information continuously over the period 2004-2011. Standard GMM-panel estimates of the average effect of innovation activities reveal significant and positive effect for internal R&D, while no effect is found for external sourcing of knowledge (external R&D, acquisition of embodied and disembodied technologies) as well as for output of innovation (process and product innovation). However, fixed-effects quantile regressions reveal that innovation activities, apart from process innovation and disembodied technical change, display a positive effect on high-growth performance. Finally, we find evidence of super-modularity of the growth function, revealing complementarities of internal R&D with product innovation, and between product and process innovation.
    Keywords: firm growth, product and process innovation, internal and external R&D, embodied and disembodied technical change, fixed-effects quantile regressions, complementarity
    Date: 2016–03–02
  11. By: Blader, Steven; Gartenberg, Claudine; Prat, Andrea
    Abstract: This paper investigates how the success of a management practice depends on the nature of the long-term relationship between the firm and its employees. A large US transportation company is in the process of fitting its trucks with an electronic on-board recorder (EOBR), which provide drivers with information on their driving performance. In this setting, a natural question is whether the optimal managerial practice consists of: (1) Letting each driver know his or her individual performance only; or (2) Also providing drivers with information about their ranking with respect to other drivers. The company is also in the first phase of a multi-year "lean-management journey", which corresponds to an overhaul of the relational contract with its employees. This phase focuses exclusively on changing employee values, mainly toward a greater emphasis on teamwork and empowerment. The main result of our randomized experiment is that (2) leads to better performance than (1) in a particular site if and only if the site has not yet received the values intervention, and worse performance if it has. The result is consistent with the presence of a conflict between competition-based managerial practices and a cooperation-based relational contract. More broadly, it highlights the role of intangible relational factors in determining the optimal set of managerial practices.
    Keywords: management; relational contracts; relative ranking
    JEL: D2
    Date: 2016–01
  12. By: Igor Gurkov (National Research University Higher School of Economics)
    Abstract: What role can collective action by foreign investors play in an environment characterized by incomplete institutions? We study this question by looking on foreign business associations in the Russian Federation. By interviewing 17 foreign business associations and conducting an online survey of their member firms, we find that business associations play an important welfare-enhancing role in providing a series of support and informational services. However, they do not play a significant role in lobbying the collective interests of their member firms, especially in the current political context in Russia where since the start of the Ukraine crisis the business community seems to have suffered a general loss of influence on political decision making
    Keywords: multinational corporations, Russia, subsidiary mandate, foreign direct investments
    JEL: F21 F23 D24
    Date: 2016
  13. By: Forlani, Emanuele; Martin, Ralf; Mion, Giordano; Muûls, Mirabelle
    Abstract: We develop a new econometric framework that simultaneously allows recovering heterogeneity in demand, TFP and markups across firms while leaving the correlation among the three unrestricted. We do this by systematically exploiting assumptions that are implicit in previous firm-level productivity estimation approaches. We use Belgian firms production data to quantify TFP, demand and mark-ups and show how they are correlated among them, across time and with measures obtained from other approaches. We also show to what extent our three dimensions of heterogeneity allow us to gain deeper and sharper insights on two key firm-level outcomes: export status and size.
    Keywords: Demand; Export status; Firm size; Markups; Production function estimation; Productivity
    JEL: D24 F14 L11 L25
    Date: 2016–01
  14. By: Jean Bonnet (CREM, UMR CNRS 6211, UFR SEGGAT, University of Caen Normandie, France)
    Abstract: In a market economy, reward structures are more or less favorable to opportunity entrepreneurship, which brings growth and jobs (Schreyer, 2000). Currently the small group of high-growth firms generates a large proportion of permanent jobs (Henrekson and Johansson, 2010; Falkenhall and Junkka, 2009) and new companies are widely represented (Daunfeldt and al, 2014). How to nurture these new companies with high-growth potential in France is a major issue that, we believe, is mainly based on a better functioning of the labor market, and the development of entrepreneurial education and ecosystems favorable to entrepreneurship.
    Keywords: Entrepreneurship by opportunity, Entrepreneurial Education, Entrepreneurial Ecosystems
    JEL: L26 J24 P16
    Date: 2016–02
  15. By: Bello, Piera; Galasso, Vincenzo
    Abstract: Do elderly workers retire early voluntarily, or are they induced (or even forced) by their employees? To establish the relevance of the labor demand component in retirement decisions, we consider a trade liberalization between Switzerland and the EU -- the Mutual Recognition Agreement (MRA). A vast literature suggests that these trade liberalizations induce firms to relocate and to restructure, with large compositional effects on the labor market particularly for the elderly workers, who face higher mobility costs. Using Swiss Labor Force Survey data, we use a difference in differences approach to compare early retirement behavior in three periods (pre-liberalization, announcement, and implementation) for three groups of industries. MRA industries represent our treatment group; control groups are non-MRA manufacturing industries, and services. Our empirical results show that elderly workers are more likely to retire early in the MRA sector during the announcement period, and that the employment of young (30-years old) male workers increases. The distribution of wages by age is instead unaffected. Additional empirical evidence using Swiss Business Census and UN Comtrade data suggests that the increase in early retirement in MRA is not explained by more firms' exits, nor by more early retirement among the exiting firms. It is rather the surviving MRA firms, which react to the increase in competition by adjusting their labor force and use more early retirement.
    Keywords: early retirement; firms' restructuring; labor demand of elderly workers
    JEL: H55 J14 J23 J26
    Date: 2015–12

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