nep-bec New Economics Papers
on Business Economics
Issue of 2016‒02‒23
sixteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Network Positioning through Manufacturing Services - Lessons from the Contract Manufacturing Industry By Viitamo, Esa; Luoto, Seppo; Seppälä, Timo
  2. Misallocation and Productivity in the Lead Up to the Eurozone Crisis By Dias, Daniel A.; Marques, Carlos Robalo; Richmond, Christine
  3. The relevance of certifications and business practices in linking smallholders and large agro-businesses in Sub-Sahara Africa By Kleemann, Linda
  4. Financial constraints and export performance: Evidence from Brazilian micro-data By Fatma Bouattour
  5. Extensive versus intensive margin over the business cycle: New evidence for Germany and the United States By Alexander Herzog-Stein; Patrick Nüß
  6. Settlements and appeals in the European Commission's cartel cases: An empirical assessment By Hellwig, Michael; Hüschelrath, Kai; Laitenberger, Ulrich
  7. On the timing of innovation and imitation By Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno
  8. Bubble-driven business cycles By Larin, Benjamin
  9. The Rise of Exporting By U.S. Firms By McCallum, Andrew H.; Lincoln, William F.
  10. Mapping Information Economy Business with Big Data: Findings from the UK By Max Nathan; Anna Rosso
  11. Domestic political competition and pro-cyclical import protection By James Lake; Maia K. Linask
  12. Towards a managerial engineering of coopetition By Mourad Hannachi; Francois-Christophe Coleno
  13. A Weibull Analysis of the Current Job Tenure in Taiwan with both Accelerated Failure-Time and Proportional Hazards Matrics By Feng-fuh Jiang
  14. Venture Capital and the Performance of Incumbents By Dore, Timothy E
  15. Replicator dynamics in value chains: explaining some puzzles of market selection By Uwe Cantner; Ivan Savin; Simone Vannuccini
  16. Emerging Multinational Corporations: Theoretical and Conceptual Framework By Mustafa Sakr; Andre Jordaan

  1. By: Viitamo, Esa; Luoto, Seppo; Seppälä, Timo
    Abstract: Through early adoption of new production technologies and service-based rivalry on the outsourcing customers, contract manufacturers integrate and enhance the efficiency of global supply networks. These influences evolve differently, however, depending on the network strategies and the competences of the contract manufacturing firms. Based on the recent findings in contract manufacturing this paper challenges and supplement the mainstream of servitization literature. In our focus the essence of servitization is not the shift to, or the specific requirements of running service business. We conclude that servitization appears more as an outcome when the firm aims for higher profitability through repositioning downstream in the industry value networks. Successful positioning and servitization is contingent on the customers’ outsourcing strategies and the accumulated competences of the contract manufacturer. While services seems to be a prerequisites for the firms’ survival in contract manufacturing business, their main purpose is to enhance customer value and retention rate in the long run. Our findings suggest that the way out of the ‘servitization trap’ is a shift towards Original Design and Manufacturing concept where differentiated value adding modules can be integrated into replicable solutions for various customers and market segments.
    Keywords: Contract manufacturing, competence, servitization, value networks, outsourcing
    Date: 2016–02–15
  2. By: Dias, Daniel A. (Board of Governors of the Federal Reserve System (U.S.)); Marques, Carlos Robalo (Banco de Portugal); Richmond, Christine (International Monetary Fund)
    Abstract: We use Portuguese firm-level data to investigate whether changes in resource misallocation may have contributed to the poor economic performance of some southern and peripheral European countries leading up to the Eurozone crisis. We extend Hsieh and Klenow's (2009) methodology to include intermediate inputs and consider all sectors of the economy (agriculture, manufacturing, and services). We find that within-industry misallocation almost doubled between 1996 and 2011. Equalizing total factor revenue productivity across firms within an industry could have boosted valued-added 48 percent and 79 percent above actual levels in 1996 and 2011, respectively. This implies that deteriorating allocative efficiency may have shaved around 1.3 percentage points off the annual GDP growth during the 1996-2011 period. Allocative efficiency deterioration, despite being a widespread phenomenon, is significantly higher in the service sector, with 5 industries accounting for 72 percent of the total variation. Capital distortions are the most important source of potential value-added efficiency gains, especially in the service sector, with a relative contribution increasing over time.
    Keywords: Misallocation; wedges; productivity; firm-level data; financial integration
    JEL: D24 O11 O41 O47
    Date: 2015–09–23
  3. By: Kleemann, Linda
    Abstract: Smallholders often have to certify according to international standards and produce under contract for large agro-businesses to access the export market. While mostly positive effects for the farmers have been found for contracts and certifications, little is known about the role of individual firm behavior and certifications in shaping farmer-agro-business relationships and contract success. This is what this article does. Data of 386 smallholders in the pineapple export sector in Ghana is analyzed quantitatively and enriched by a detailed case study of a large-scale agro-business in Ghana called Blues Skies. The results show that certification is an agent of change in farmer-agro-business relations. Building trust and aligning expectations of farmers and firms is important for success. Additionally, individual firm behavior matters more than taken into account in previous research. Our case study shows that three 'R', reliability, reputation and respect, constitute the basis for contract relationships that benefit all.
    Keywords: contract farming,certification,smallholders,Ghana,firm behavior
    Date: 2015
  4. By: Fatma Bouattour (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine)
    Abstract: Despite the growing role of Brazil in international trade, exports still face challenges. Following the theoretical framework of Manova (2013), this paper provides firm-level evidence that financial constraints hamper the export performances. Using customs data from Brazil, I show through a probability model, that Large firms exhibit more probability to have export performances when compared with Small and Medium-sized firms, and that this advantage tends to decrease in industries with high external funding needs. The sectors financial vulnerability is proxied with two measures borrowed from Rajan and Zingales (1998) and computed for Brazilian industries over the recent period of the 2000s. The results are globally robust to the modification of the proxies of sectoral external finance dependence, used in the literature. Other tests demonstrate that Brazilian subsidiaries have greater chances to be export performant, and that there is a "regional effect" that makes some Brazilian regions export more than others. This paper also provides an insight of the effects of the global crisis of 2008 on the export patterns.
    Keywords: Export,firms,international trade
    Date: 2015–06–22
  5. By: Alexander Herzog-Stein; Patrick Nüß
    Abstract: This article analyses the relevance of the extensive and the intensive margin of labour adjustment over the business cycle in Germany and in the United States. Previous research has found that, firstly, the extensive margin dominates and that, secondly, the relative relevance of the two margins is of similar magnitude in both countries. This is in contrast with results from the research on the German employment performance in the Great Recession which attributed part of the employment success to the widespread use of instruments of internal flexibility. Our results confirm that generally, the extensive margin is still the dominant margin of labour adjustment over the business cycle in both countries. While our reassessment shows that the relative importance of the extensive and intensive margin for the United States is stable over time, in Germany it is quite volatile over time. In general the intensive margin in Germany is more important than in the United States. However, its actual size depends crucially on the choice of the smoothing parameter of the Hodrick-Prescott Filter. In the Great Recession and the subsequent time period the intensive margin is dominant in Germany independent of the choice of the smoothing parameter.
    Keywords: Germany, United States, aggregate labour adjustment, extensive and intensive margin, business cycle, total hours worked, employment, hours per employee, Great Recession
    JEL: E24 E32 J2
    Date: 2016
  6. By: Hellwig, Michael; Hüschelrath, Kai; Laitenberger, Ulrich
    Abstract: The introduction of the European Union (EU) Settlement Procedure in 2008 aimed at promoting the procedural efficiency of cartel investigations by the European Commission (EC). We use a data set consisting of 579 firms groups convicted by the EC for cartelization from 2000 to 2015 to investigate the impact of the settlement procedure on the probability to file an appeal. Based on the estimation of a model of the firm's decision to appeal in the presettlement era, we subsequently run out-of-sample predictions to estimate the number of hypothetical appeals cases in the settlement era absent the settlement procedure. Our findings of a settlement-induced reduction in the number of appeals of up to 55 percent allow the conclusion that the introduction of the settlement procedure generated substantial additional benefits to society beyond its undisputed key contribution of a faster and more efficient handling of cartel investigations by the EC.
    Keywords: antitrust policy,cartels,settlements,appeals,ex-post evaluation,European Union
    JEL: K21 L41
    Date: 2016
  7. By: Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno
    Abstract: When fixed costs of innovation and imitation differ, strategic competition between duopolists involves either preemption or attrition, the latter being likelier with high uncertainty. We show that industry value is maximized when firms neither stall nor hasten entry, whereas social welfare has local optima in both the attrition and preemption ranges. The social optimum implies a positive imitation cost, and with static business-stealing and sufficient discounting it involves preemption. Finally we endogenize entry barriers and discuss contracting, showing that firms are more likely to rely on secrecy and patents at low imitation costs and that simple licensing schemes are welfare improving.
    Keywords: Dynamic oligopoly; Knowledge spillover; Real options
    JEL: G31 L13 O33
    Date: 2015–12–18
  8. By: Larin, Benjamin
    Abstract: The 2007-2008 financial crisis highlighted that a turmoil in the financial sector including bursting asset price bubbles can cause pronounced and persistent fluctuations in real economic activity. This justifies the consideration of evolving and bursting asset price bubbles as another source of fluctuations in business cycle models. In this paper rational asset price bubbles are incorporated into a life-cycle RBC model as first developed by Ríos-Rull (1996). The calibration of the model to the post-war US economy and the numerical solution show that the model is able to depict plausible bubble-driven business cycles. In particular, the model generates i) a higher and empirically more plausible volatility of consumption at the cost of ii) a lower and empirically less plausible contemporaneous correlation of consumption with output than the life-cycle RBC model without bubbles.
    Keywords: Computable General Equilibrium,Bubble,Asset Price,Real Activity
    JEL: D58 E32 E44
    Date: 2016
  9. By: McCallum, Andrew H. (Board of Governors of the Federal Reserve System (U.S.)); Lincoln, William F. (Claremont McKenna College)
    Abstract: Although a great deal of ink has been spilled over the consequences of globalization, we do not yet fully understand the causes of increased worldwide trade. Using confidential microdata from the U.S. Census, we document widespread entry into countries abroad by U.S. firms from 1987 to 2006. We show that this extensive margin growth is unlikely to have been due to significant declines in entry costs. We instead find evidence of large roles for the development of the internet, trade agreements, and foreign income growth in driving these trends.
    Keywords: globalization; barriers to entry; international trade; internet
    JEL: F10 F23 L10 L86 M21
    Date: 2016–02–10
  10. By: Max Nathan; Anna Rosso
    Abstract: Governments around the world want to develop their ICT and digital industries. Policymakers thus need a clear sense of the size and characteristics of digital businesses, but this is hard to do with conventional datasets and industry codes. This paper uses innovative ‘big data’ resources to perform an alternative analysis at company level, focusing on ICT-producing firms in the UK (which the UK government refers to as the ‘information economy’). Exploiting a combination of public, observed and modelled variables, we develop a novel ‘sector-product’ approach and use text mining to provide further detail on the activities of key sector-product cells. On our preferred estimates, we find that counts of information economy firms are 42% larger than SIC-based estimates, with at least 70,000 more companies. We also find ICT employment shares over double the conventional estimates, although this result is more speculative. Our findings are robust to various scope, selection and sample construction challenges. We use our experiences to reflect on the broader pros and cons of frontier data use.
    Date: 2014–11
  11. By: James Lake (Southern Methodist University); Maia K. Linask (University of Richmond)
    Abstract: Governments, especially in developing countries, routinely practice binding overhang (i.e. setting applied tariffs below binding WTO commitments) and frequently move applied tariffs for given products up and down over the business cycle. Moreover, applied tariffs are pro-cyclical in developing countries. We explain this phenomenon using a dynamic theory of lobbying between domestic interest groups. Applied tariffs are pro-cyclical when high-tariff interests (e.g. import-competing industries) capture the government: these groups concede lower tariffs to low-tariff interest groups (e.g. exporting firms or firms using imported inputs) during recessions because recessions lower the opportunity cost of lobbying and thereby generate stronger lobbying threats.
    Keywords: Binding overhang, lobbying, tariff bindings, applied tariffs
    JEL: C73 D72 F13
    Date: 2015–02
  12. By: Mourad Hannachi (SADAPT - Sciences pour l'Action et le Développement : Activités, Produits, Territoires - AgroParisTech - Institut national de la recherche agronomique (INRA)); Francois-Christophe Coleno (SADAPT - Sciences pour l'Action et le Développement : Activités, Produits, Territoires - AgroParisTech - Institut national de la recherche agronomique (INRA))
    Abstract: Even if academics and practitioners identify coopetition as a winning strategy, a coopetition relationship appear to be difficult to sustain. Coopetition is relied to be a paradoxical and unstable interfirm relationship related with tensions. Academic works begun to study the causes and nature of tension in coopetition relationship but little is known about the way those tension is managed. The aim of this paper is to investigate, via in depth case studies, the management tools used to manage coopetition at the inter-organizational level. Through multiples case studies in the same industry (the French grain merchants industry), we reveal the existence of differing management tools of the coopetition relationships. Some tools found by our research (tacit conventions, mediation arenas, coopetition inducers) seem particularly novel in the coopetition literature. The use of tacit convention and social pressure epitomize the embeddedness and the social construction of the coopetition relationship. It shows that inter-firm coordination can exist in a direct and informal way, without being locked into a rigid structure and without collusion. Moreover, we found that an external party can induce the coopetition and bring rival firms to consider a coopetitive relationship. This finding reveals that some tools can change inter-firms dynamics and rationalities giving rise to coopetition. Those findings lead us to reveal the perspective of a managerial engineering of coopetition and to suggest some embryonic basis to open the way for its development.
    Keywords: biotechnology,coopetition,collective strategies,Inter-organizational relationships,Management tools,gmo
    Date: 2016
  13. By: Feng-fuh Jiang (Institute of Economics, Academia Sinica, Taipei, Taiwan)
    Abstract: Relations of current job tenure, which refers to the length of time in the current role at a specific firm, with firm-specific human capital and their determinants are examined theoretically. The approach of estimation for the survival model is explored by associating Weibulls parametric log-linear duration model with the accelerated life model, as well as both proportional and relative hazards as embedded in Cox's proportional hazards model. By fitting the survivalmodel to household data from the May 2012 Manpower Utilization Survey of Taiwan, the estimation results can be briefly summarized as follows: (1) The duration of the current job tenure appears to be positively associated with formal schooling and general experience levels, government and large-sized firms, typical employment, full-time job, married with spouse present,and the prime agers of 29-44, and hence negatively related to the situations that it otherwise would be, i.e., medium- or small-sized firm, atypical employment, part-time job, single or no spouse status, and the mid and elderly agers of 45-64. (2) The current job tenure of the reference subject fails around 8 times as earlier (or ages around 8 times as fast) as that of the subject with covariates. More interestingly, this implies that the risk that the current job tenure of the subject fails is exposed at a given survival time to only around an eighth times the risk that the current job tenure of the reference subject fails at about an eighth time as earlie as the survival time. (3)Of all the covariates, formal schooling level imposes the greatest positive effect on the time length of current job tenure and hence have the greatest mitigating effect on the risk of current job tenure; conversely, atypical employment imposes the largest negative effect on the time length of current job tenure and hence have the largest increasing effect on the risk of current job tenure. (4) Estimation results from Weibull do have implications similar to correspondingly respective results from both the accelerated failure-time and proportional hazards metrics. JEL Classification: J24, J53, J63
    Keywords: Current Job Tenure, Weibull Duration Analysis, Accelerated Failure-Time Model, Proportional Hazards, Relative Hazards
    Date: 2016–02
  14. By: Dore, Timothy E (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: I study the effect of investment in young, private firms by venture capitalists (VC) on public firms in the same industry. I construct an instrument for VC investment that relies on individual VC's investment histories, holdings of equity stakes in IPO firms, and aggregate market returns immediately following those IPOs. I find that increased VC investment has a large effect on incumbent profitability. The effect arises due to higher costs and not depressed sales. The effect is short lived as firms respond by reallocating resources away from treated markets and by reducing their use of labor.
    Keywords: Corporate finance; Financial markets; Venture Capital
    Date: 2015–09–25
  15. By: Uwe Cantner (School of Economics and Business Administration, Friedrich-Schiller-University Jena, and Department of Marketing and Management, University of Southern Denmark); Ivan Savin (School of Economics and Business Administration, Friedrich-Schiller-University Jena, and Chair for Economic Policy, Karlsruhe Institute of Technology); Simone Vannuccini (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: The pure model of replicator dynamics though providing important insights in the evolution of markets has not found much of empirical support. This paper extends the model to the case of firms vertically integrated in value chains. We show that i) by taking value chains into account, the replicator dynamics may revert its effect. In these regressive developments of market selection, firms with low fitness expand because of being integrated with highly fit partners, and the other way around; ii) allowing partner's switching within a value chain illustrates that periods of instability in the early stage of industry life-cycle may be the result of an 'optimization' of partners within a value chain providing a novel and simple explanation to the evidence discussed by Mazzucato (1998); iii) there are distinct differences in the contribution to market selection between the layers of a value chain, causing strategic advantages to firms in partnering.
    Keywords: innovation, replicator dynamics, returns to scale, value chain
    JEL: C63 D24 L14 O32
    Date: 2016–02–12
  16. By: Mustafa Sakr (Department of Economics, University of Pretoria); Andre Jordaan (Department of Economics, University of Pretoria)
    Abstract: Given the looming significance of emerging multinational corporations, this article outlines the primary theoretical aspects pertaining to this growing phenomenon. The following four main aspects are covered: The concept of emerging multinational corporations, theories explaining their evolution, market penetration modes, and finally the types of such firms. Based on the motive of multinationality, it is proposed to classify the different theories into three groups, namely: Firm advantages (asset exploiting), host country advantages (asset seeking), and both firm and host country advantages. This article distinguishes between 10 different types of emerging multinational corporations, based on the timing and the motives for initiating the multinationality process, the relation between the headquarters and affiliates, and the geographical dispersion of foreign activities. Entry modes adopted by emerging multinational corporations vary significantly according to ownership, the nature of overseas’ operations, the control of parent firms over these activities, and the extent of externalising and internalising.
    Keywords: emerging multinational corporations, foreign market entry modes, theories of emerging multinational corporations, types of emerging multinational corporations
    JEL: P45 F21
    Date: 2016–01

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