nep-bec New Economics Papers
on Business Economics
Issue of 2016‒03‒17
sixteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Occupational Choice, Human Capital, and Financial Constraints By Rui Castro; Pavel Sevcik
  2. Small, young, and exporters: New evidence on the determinants of firm growth By Marco Grazzi; Daniele Moschella
  3. CSR related management practices and Firm Performance: An Empirical Analysis of the Quantity-Quality Trade-off on French Data By Patricia Crifo; Marc-Arthur Diaye; Sanja Pekovic
  4. Competition and corporate control in partial ownership acquisitions By Stühmeier, Torben
  5. Technology Shock and the Business Cycle in the G7 Countries: A Structural Vector Error Correction Model By Mukantabana, Athanasie; Habimana, Olivier
  6. The Portrait of Success: Firms in International Trade By Adriana Peluffo
  7. Firm Dynamics and Employment Protection: Evidence from Sectoral Data By Bottasso, Anna; Conti, Maurizio; Sulis, Giovanni
  8. Seniority wages and the role of firms in retirement By Frimmel W.; Horvath T.; Schnalzenberger M.; Winter-Ebmer R.
  9. Sharing a Ride on the Commodities Roller Coaster; Common Factors in Business Cycles of Emerging Economies By Andres Fernandez; Andres Gonzalez; Diego Rodriguez
  10. Core Existence in Vertically Differentiated Markets By Jean J. Gabszewicz; Marco A. Marini; Ornella Tarola
  11. Size dependent tax incentives, threshold effects and horizontal subcontracting in Indian manufacturing: Evidence from factory and firm-level panel data sets By K.V. Ramaswamy
  12. Understanding Firms' Inflation Expectations Using the Bank of Canada's Business Outlook Survey By Simon Richards; Matthieu Verstraete
  13. New firm formation in the wake of mergers and acquisitions: Are employees pushed or pulled into entrepreneurship? By Lougui, Monia; Broström, Anders
  14. Equal Opportunity? Gender Gaps in CEO Appointments and Executive Pay By Keluoharju, Matti; Knüpfer, Samuli; Tåg, Joacim
  15. Do international flights promote FDI? : the role of face-to-face communication By Tanaka, Kiyoyasu
  16. The Entrepreneurship Beveridge Curve By Gries, Thomas; Jungblut, Stefan; Naudé, Wim

  1. By: Rui Castro (University of Western Ontario); Pavel Sevcik (ESG UQAM)
    Abstract: We study the aggregate productivity effects of firm-level financial frictions. Credit constraints affect not only production decisions but also household-level schooling decisions. In turn, entrepreneurial schooling decisions impact firm-level productivities, whose cross-sectional distribution becomes endogenous. In anticipation of future constraints, entrepreneurs under-invest in schooling. Frictions lower aggregate productivity because talent is misallocated across occupations, and capital misallocated across firms. In addition, firm-level productivities are also lower due to distortions induced by the schooling responses. We find that these effects combined account for about 1/5 of the U.S.-India aggregate productivity difference. Requiring the model to match schooling differences significantly amplifies the impact of frictions, and the model accounts for 58% of the aggregate productivity difference.
    Keywords: Aggregate Productivity; Financial Frictions; Entrepreneurship; Human Capital
    JEL: E24 I25 J24 O11 O15 O16
    Date: 2016
  2. By: Marco Grazzi; Daniele Moschella
    Abstract: This work investigates how the export status of the firm influences the patterns of growth at different age classes. We address this research question resorting to a novel set of data that links together the universe of Italian firms and detailed data on export transactions. We find that the positive relationship between export status and growth declines with firm age. Further, we also find that, even when accounting for the role of age, the negative size-growth relationship does not disappear, contrary to some recent evidence. These results, which are robust to a series of controls, suggest for a positive signaling role of the export status which is stronger for young exporters or born globals. Exploiting the product-country level dimension of the customs data we also provide, for the first time, evidence on differences in exchange rates pass through between young and experienced exporters. In particular, we find that early exporters appear to be well equipped to face exchange rates variations as their exports decrease less following a currency appreciation.
    Keywords: Firm age and performance, Firm growth, International trade, Born global, Exchange rates pass-through
    Date: 2016–02–25
  3. By: Patricia Crifo (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université de Montréal, Economix, Université Paris Ouest Nanterre la Défense, 200 Avenue de la République, 92001 Nanterre Cedex - affiliation inconnue); Marc-Arthur Diaye (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne); Sanja Pekovic (DRM - Dauphine Recherches en Management - Université Paris IX - Paris Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper analyzes how different combinations of Corporate Social Responsibility (CSR) dimensions affect corporate economic performance. We use various dimensions of CSR to examine whether firms rely on different combinations of CSR, in terms of quality versus quantity of CSR practices. Our empirical analysis based on an original database including 10,293 French firms shows that different CSR dimensions in isolation impact positively firms’ profits but their effect in term on intensity varies among CSR dimensions. Moreover, the findings on the qualitative CSR measure, based on interaction between its dimensions, show that the substitutability of these dimensions is highly significant for firm performance. However, in terms of the intensity, those interactions produce differential effects. Actually, asking whether a firm starting with a certain configuration cannot perform better by adding or removing some dimension(s) we found that only one configuration fulfills this requirement: green and HR. The interpretation is that when a firm starts with this configuration then it is better not to move to another configuration. In all other configurations, firms can always improve their profits either by adding or removing some dimensions. Finally, the profitability of CSR investments in French firms seems to rely on a specific qualitative mix of different CSR dimensions rather than a pure quantitative approach accumulating practices without designing a consistent set of interactions among them.
    Keywords: Corporate social responsibility,Firm performance,Substitutability,Complementarity,Trade-off,Simultaneous equations models
    Date: 2016
  4. By: Stühmeier, Torben
    Abstract: Competition authorities have a growing interest in assessing the effects of partial ownership arrangements. We show that the effects of such agreements on competition and welfare depend on the intensity of competition in the market and on the firms' governance structure. When assessing the effects of partial ownership, competition policy has to consider both the financial interest and level of control of the acquiring firm in the target firm.
    Keywords: corporate control,merger,partial acquisition
    JEL: L11 L13 L41
    Date: 2016
  5. By: Mukantabana, Athanasie; Habimana, Olivier
    Abstract: This paper investigates the importance of technology shock in explaining fluctuations over business cycles and its contractionary effects. Applying the SVEC model on quarterly data of G7 countries and accounting for long cycles in hours worked, there is evidence of a decline in employment as measured by hours worked and investment following a positive technology shock. Hours worked show a persistent decline in France and UK, and this lasts for seven years in Italy, three years in Japan, two years in the USA and Canada; and one year in Germany. However, our findings suggest that technology shocks may play only a limited role in deriving the business cycles in the G7 countries; for they only account for under 30 percent of the business cycle variation in hours and investment, under 35 percent of the business cycle variation in consumption, and under 50 percent of the business cycle variation in output of most of the G7 countries. Our findings do not support the conventional real business cycle interpretation; instead, they are consistent with the predictions of the sticky-price model.
    Keywords: Business cycle, G7, sticky-price model, SVEC, technology shock
    JEL: E24 E32
    Date: 2015–10–04
  6. By: Adriana Peluffo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This article sets a portrait of firm heterogeneity associated to international activities, showing how they differ from firms oriented exclusively towards the domestic market and the impact of trade flows along several dimensions: trade status, product and country extensive margins of exports and imports, and trade with different type of partners (developed vs. less developed countries). These first descriptive approaches are complemented with regressions by ordinary least squares and fixed effects (controlling for industrial sector, year, foreign ownership, and firm size), allowing the comparison of the results obtained to the findings for other countries for which there are similar works. To this end we use detailed national customs and manufacturing firm survey data of Uruguay for the period 1997-2006. In line with previous works we find that among firms trade is more concentrated than employment and sales, and that two-way traders (firms that both export and import) perform better than only exporters, only importers and domestic firms. Furthermore, we find that the product extensive margin of imports and the country extensive margin of exports have positive effects on two key variables: total factor productivity and employment. Finally, the results are also supportive that firms trading only with high income countries exhibit a better performance than firms trading only with Mercosur partners, but the best performing firms are those that trade with both types of markets.
    Keywords: trade, labour markets, productivity, exports
    JEL: F14 F16 J23 O33
    Date: 2016–01
  7. By: Bottasso, Anna (University of Genova); Conti, Maurizio (University of Genova); Sulis, Giovanni (University of Cagliari)
    Abstract: In this paper we analyse the impact of employment protection legislation (EPL) on firms' entry and exit rates for a large sample of industries of thirteen countries selected from the most recent version of the OECD Structural and Business Statistics Database. Using a differences-in-differences identification strategy, we find that more stringent EPL is associated to lower entry and exit rates, particularly in industries characterized by higher job reallocation intensity. We also find that both collective and individual dismissal regulations reduce firms' entry and exit rates. Interestingly, our results suggest that the negative effects of EPL is stronger in the case of firms between one and nine employees while, in the case of larger ones, results are not clear-cut. An extensive sensitivity analysis confirm the robustness of our findings.
    Keywords: entry and exit, turnover, employment protection legislation, reallocation
    JEL: J65 L11 L26
    Date: 2016–02
  8. By: Frimmel W.; Horvath T.; Schnalzenberger M.; Winter-Ebmer R. (GSBE)
    Abstract: In general, retirement is seen as a pure labor supply phenomenon, but firms can have strong incentives to send expensive older workers into retirement. Based on the seniority wage model developed by Lazear 1979, we discuss steep seniority wage proles as incentives for firms to dismiss older workers before retirement. Conditional on individual retirement incentives, e.g., social security wealth or health status, the steepness of the wage profile will have different incentives for workers as compared to firms when it comes to the retirement date. Using an instrumentalvariable approach to account for selection of workers in our firms and for reverse causality, we find that firms with higher labor costs for older workers are associated with lower job exit age.
    Keywords: Social Security and Public Pensions; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination; Retirement; Retirement Policies; Wage Level and Structure; Wage Differentials;
    JEL: J14 J26 J31 H55
    Date: 2015
  9. By: Andres Fernandez; Andres Gonzalez; Diego Rodriguez
    Abstract: Fluctuations in commodity prices are an important driver of business cycles in small emerging market economies (EMEs). We document how these fluctuations correlate strongly with the business cycle in EMEs. We then embed a commodity sector into a multi-country EMEs’ business cycle model where exogenous fluctuations in commodity prices follow a common dynamic factor structure and coexist with other driving forces. The estimated model assigns to commodity shocks 42 percent of the variance in income, of which a considerable part is linked to the common factor. A further amplification mechanism is a †spillover†effect from commodity prices to risk premia.
    Keywords: Business cycles;Commodity prices;Emerging economies, common factors, Bayesian estimation, dynamic stochastic equilibrium models, commodity, prices, price, commodity price, Open Economy Macroeconomics, International Business Cycles, All Countries, dynamic stochastic equilibrium models.,
    Date: 2015–12–29
  10. By: Jean J. Gabszewicz (CORE, Universite' Catholique de Louvain, Belgium); Marco A. Marini (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy); Ornella Tarola (University of Rome La Sapienza, Rome, Italy)
    Abstract: We prove that a sufficient condition for the core existence in a n-firm vertically differentiated market is that the qualities of Â…firmsÂ’ products are equally-spaced along the quality spectrum. This result contributes to see that a fully collusive agreement among firms in such markets is more easily reachable when product qualities are not distributed too asymmetrically along the quality ladder.
    Keywords: Vertically Differentiated Markets ; Price Collusion ; Grand Coalition ; Coalition Stability ; Core
    Date: 2016
  11. By: K.V. Ramaswamy (Indira Gandhi Institute of Development Research; Institute of Economic Growth)
    Abstract: India's industrial protection and promotion policies for small-scale enterprises have figured prominently in the literature on industrialization policies in developing countries. These size dependent tax incentives could encourage fragmentation of production and prevent natural up-scaling of firm sizes. The author presents a new empirical application of the idea of threshold burden of tax incentives in India. The study is based on a large unbalanced panel of manufacturing factories in the formal sector spanning the period 1999-2008 and a panel of manufacturing companies covering the period 1990-2010. Average subcontracting intensity was found to be significantly higher in manufacturing factories and firms with sales turnover below the ceiling level set by the tax rules. Econometric tests based on Fixed Effect models supported the hypothesis that firms take advantage of tax incentives by staying below the threshold sales turnover. This is consistent with the idea of threshold effects of size dependent tax incentives.
    Keywords: Firm Size, Threshold Effects, Regulations, manufacturing and small-scale enterprises
    JEL: O14 O17 L60 H32 H25
    Date: 2016–02
  12. By: Simon Richards; Matthieu Verstraete
    Abstract: Inflation expectations are a key determinant of actual and future inflation and thus matter for the conduct of monetary policy. We study how firms form their inflation expectations using quarterly firm-level data from the Bank of Canada’s Business Outlook Survey, spanning the 2001 to 2015 period. The data are aggregated to construct an inflation expectations index. Results based on the index suggest that expectations are not consistent with the rationality assumption but are, still, more complex than purely adaptive expectations. Firms’ own unique experiences, such as the dynamics of the prices they expect to pay (wages/inputs), significantly influence aggregate expectations. Expectations are also found to be significantly and positively correlated with movements in oil prices. Most of the preceding results hold at the firm level. The estimation of structural shift specifications suggests that inflation expectations in Canada have drifted downward since the Great Recession. However, the data do not suggest that Canadian businesses’ expectations have become unanchored.
    Keywords: Central bank research, Credibility, Econometric and statistical methods, Firm dynamics, Inflation and prices, Inflation targets, Monetary policy framework
    JEL: C1 C2 C25 D21 D84 E31 E52 E58
    Date: 2016
  13. By: Lougui, Monia (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This study investigates the relationship between mergers and acquisitions (M&A) and employee entrepreneurship in human capital-intensive service sectors. We investigate two sets of theoretical mechanisms. First, M&As may push employees entrepreneurship by lowering the average barriers of leaving the current employment (i.e. being associated with general deterioration of working conditions). Second, M&A activities may generate new entrepreneurial opportunities, which are first and foremost accessible by employees directly affected by M&As. Results on employee entrepreneurship in 3 039 Swedish firms during the time period 2000-2009 confirm that the number of firms spawned from a specific incumbent increases following an M&A. Push-oriented factors are found to contribute to this effect, but a dominating part of the total effect remains unexplained. This suggests that pull-oriented explanations of opportunity creation in the wake of M&As constitute an important avenue for further research on employee entrepreneurship.
    Keywords: employee entrepreneurship; mergers; acquisitions; opportunity costs; entrepreneurial opportunity
    JEL: G34 L26 L80 M50
    Date: 2016–02–22
  14. By: Keluoharju, Matti (Aalto University School of Business); Knüpfer, Samuli (BI Norwegian Business School); Tåg, Joacim (Research Institute of Industrial Economics (IFN))
    Abstract: This paper uses exceptionally rich data on Swedish corporate executives and their personal characteristics to study gender gaps in CEO appointments and pay. Both gaps are sizeable: 18% for CEO appointments and 27% for pay. At most one-eight of the gaps can be attributed to observable gender differences in executives’ and their firms’ characteristics. Further tests suggest that unobservable gender differences in characteristics are unlikely to account for the remaining gaps. Instead, our results are consistent with the view that male and female executives sharing equal attributes neither have equal opportunities to reach the top, nor are they equally paid.
    Keywords: CEOs; Compensation; Discrimination; Executives; Gender differences
    JEL: G34 J16 J24 J31
    Date: 2016–02–18
  15. By: Tanaka, Kiyoyasu
    Abstract: Air transportation facilitates face-to-face interactions across borders for the spatial expansion of manufacturing production. I investigate the impact of international flights on FDI entry by Japanese firms. I find that FDI entry significantly increases with the weekly frequency of flights from Japan, and the positive impact increases with a proxy for an intensity of face-to-face communication between the parent firm and foreign affiliate. The results are robust to estimation methods, additional control variables, and definitions of face-to-face communication. Thus, the results suggest that flights encourage FDI entry through a reduction in face-to-face communication costs.
    Keywords: Japan, Air transport, Foreign investments, Direct Flight, FDI, Face-to-Face Contact
    JEL: F21 F23 L9
    Date: 2016–02
  16. By: Gries, Thomas (University of Paderborn); Jungblut, Stefan (University of Paderborn); Naudé, Wim (Maastricht University)
    Abstract: We propose that the rate of creation and failure of start-up firms can be modelled as a search and matching process, following labor market matching models. Setting out an endogenous growth model with entrepreneurship we derive a Entrepreneurship Beveridge Curve, through which we illustrate that entrepreneurial start-ups are the outcome of the efficiency with which entrepreneurial abilities are matched with business opportunities. The Entrepreneurship Beveridge Curve is a potentially useful analytical tool to add to the formalization of the economics of entrepreneurship, and we mention a number of extentions and applications.
    Keywords: entrepreneurship, start-ups, labor market matching
    JEL: L26 M13 O10 O14
    Date: 2016–02

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