nep-bec New Economics Papers
on Business Economics
Issue of 2016‒04‒16
fifteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Complementarities in organizational innovation practices: evidence from French industrial firms Complementarities in organizational innovation practices: evidence from French industrial firms By Caroline Mothe; Thu Nguyen Nguyen Thi; Phu Nguyen-Van
  2. Management Practices, Workforce Selection,and Productivity By Bender, Stefan; Bloom, Nicholas; Card, David; Van Reenen, John; Wolter, Stefanie
  3. The Impact of Innovation in the Multinational Firm By L. Kamran Bilir; Eduardo Morales
  4. Firm Level Allocative Inefficiency: Evidence from France By Lionel Fontagné; Gianluca Santoni
  5. The Complex Interactions between Economic Growth and Market Concentration in a Model of Structural Change. By Tommaso Ciarli; Marco Valente
  6. Court Enforcement, Bank Loans and Firm Investment: evidence from a bankruptcy reform in Brazil By Jacopo Ponticelli; Leonardo S. Alencar
  7. Gender Diversity in Senior Positions and Firm Performance; Evidence from Europe By Lone Engbo Christiansen; Huidan Lin; Joana Pereira; Petia Topalova; Rima Turk
  8. Trading Skill: Evidence from Trades of Corporate Insiders in Their Personal Portfolios By Itzhak Ben-David; Justin Birru; Andrea Rossi
  9. Why Do Companies Issue Sukuk? By Paul-Olivier KLEIN; Laurent WEILL
  10. Developing a labour utilisation composite index for New Zealand By Jed Armstrong; Günes Kamber; Özer Karagedikli
  11. Empirical Evidence on Conditional Pricing Practices By Bogdan Genchev; Julie Holland Mortimer
  12. The impact of performance pay on sales and fundraising By Maurice J.G. Bun; Leo Huberts
  13. International shocks and domestic prices: how large are strategic complementarities? By Amiti, Mary; Itskhoki, Oleg; Konings, Jozef
  14. Innovation and Performance of Enterprises: The Case of SMEs in Vietnam By Vu, Hoang Nam; Doan, Quang Hung
  15. Organisational mergers: a behavioural perspective on identity management By Giessner, S.R.

  1. By: Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Thu Nguyen Nguyen Thi (CEPS/INSTEAD - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development); Phu Nguyen-Van (BETA - Bureau d'Economie Théorique et Appliquée - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Organizational innovation favours technological innovation. Yet the question of which organizational practices should be combined—that is, their compatibility—remains unanswered. This empirical investigation of patterns of complementarity considers three organizational practices: business practices, workplace organization, and external relations. Firm-level data drawn from the 2008 French Community Innovation Survey and supermodularity tests confirm the crucial role of organizational innovation in increasing firms’ innovation. The pattern of complementarity among organizational practices differs according to the type of innovation (i.e., product or process), as well as the type of measure used to assess technological innovation performance. These results highlight the complexity of managing organizational practices to encourage firm innovation.
    Keywords: Complementarity, Organizational innovation, Supermodularity, Technological innovation
    Date: 2015
  2. By: Bender, Stefan; Bloom, Nicholas; Card, David; Van Reenen, John; Wolter, Stefanie
    Abstract: Recent research suggests that much of the cross-firm variation in measured productivity is due to differences in use of advanced management practices. Many of these practices - including monitoring, goal setting, and the use of incentives - are mediated through employee decision-making and effort. To the extent that these practices are complementary with workers' skills, better-managed firms will tend to recruit higher-ability workers and adopt pay practices to retain these employees. We use a unique data set that combines detailed survey data on the management practices of German manufacturing firms with longitudinal earnings records for their employees to study the relationship between productivity, management, worker ability, and pay. As documented by Bloom and Van Reenen (2007) there is a strong partial correlation between management practice scores and firm-level productivity in Germany. In our preferred TFP estimates only a small fraction of this correlation is explained by the higher human capital of the average employee at better-managed firms. A larger share (about 13%) is attributable to the human capital of the highest-paid workers, a group we interpret as representing the managers of the firm. And a similar amount is mediated through the pay premiums offered by better-managed firms. Looking at employee inflows and outflows, we confirm that better-managed firms systematically recruit and retain workers with higher average human capital. Overall, we conclude that workforce selection and positive pay premiums explain just under 30% of the measured impact of management practices on productivity in German manufacturing.
    Keywords: Management practices; productivity; wages
    JEL: L2 M2 O32 O33
    Date: 2016–03
  3. By: L. Kamran Bilir; Eduardo Morales
    Abstract: When firms operate production plants in multiple countries, technological improvements developed in one country may be shared with firm sites abroad for efficiency gain. We develop a dynamic model that allows for such intrafirm transfer, and apply it to measure the impact of innovation on performance for a panel of U.S. multinationals. Our estimates indicate U.S. parent R&D raises performance significantly at firm locations abroad, and also complements R&D by affiliates. Parent R&D is a substantially more important determinant of firm performance than affiliate R&D. We identify these R&D effects using variation in location-specific innovation policies.
    JEL: F00 F23 O30
    Date: 2016–04
  4. By: Lionel Fontagné (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Gianluca Santoni (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)
    Abstract: A large portion of productivity differentials among locations is related to density. Firms located in denser areas are more productive due to agglomeration economies (Combes et al., 2012). We provide in this paper an explanation of such economies: lower input misallocation. The distribution of resources among heterogeneous firms has relevant consequences on allocative efficiency and denser areas provide a more favorable environment for dynamic matching between employers and employees. Using a methodology proposed by Petrin and Sivadasan (2013) we are able to assess the degree of resource misallocation among firms within sectors for each of the 96 French "Départements". Based on firm-level productivity estimates, we identify in the gap between the value of the marginal product and marginal input price the output loss due to inefficiencies in inputs allocation. Over the period 1993-2007 the average gap at firm level is around 10 thousands euro, showing a relevant increase starting from the early 2000s. Importantly, firms misallocations are lower in denser areas, suggesting that the matching mechanism is playing a role in explaining the productivity premium of agglomerated locations.
    Keywords: Misallocation, Productivity, Firm Level Data
    Date: 2015–07
  5. By: Tommaso Ciarli (SPRU, University of Sussex, UK); Marco Valente (University of L'Aquila, IT)
    Abstract: We study the relation between variety, market concentration, and economic growth, along different phases of economic development which entail a number of changes to the structure of production and consumption in the economy. We focus on three aspects of structural change, which are connected and are correlated to variety, market concentration, and economic growth: (i) product quality; (ii) firms’ mark-ups; and (iii) imitation of consumer preferences for price and quality. We model the interactions among several aspects of structural change such as firm size and hierarchical structure, innovation in capital vintages, the emergence of social classes, income distribution, and consumer preferences across and within classes. We find that market concentration has a significant and positive impact on economic growth only in the presence of sufficiently large demand. The strongest effects emerge in the presence of a more skewed firm size distribution and firms producing higher priced and higher quality goods. We find also that this effect is influenced strongly by different aspects of structural change. Changes in the behaviour (or income) of the less wealthy income classes is crucial as is investment in new capital vintages, and the emergence of diverse income classes with heterogeneous consumption preferences. In contrast, we find that supply side product variety, cœteris paribus, has no significant effect on growth.
    Keywords: economic growth; structural change; market concentration; consumer dynamics; product variety; agent based simulations
    JEL: O11 O41 O33 C63
    Date: 2016–06
  6. By: Jacopo Ponticelli; Leonardo S. Alencar
    Abstract: We exploit variation in the congestion of civil courts across Brazilian municipalities, together with a bankruptcy reform increasing secured creditors’ protection, to estimate the effect of enforcement on firm access to finance, investment and size. We find that firms operating in municipalities with less congested courts experienced larger increase in the use of secured loans, as well as a larger increase in investment and value of output in the years after the reform. To establish the direction of causality, we use an instrumental variable strategy that exploits Brazilian state laws on judicial organization, and focus on differences in court congestion across otherwise similar neighboring municipalities located across judicial district borders within the same state. Together, the evidence indicates that differences in court enforcement affect the impact of financial reform on firm access to finance, investment and size
    Date: 2016–04
  7. By: Lone Engbo Christiansen; Huidan Lin; Joana Pereira; Petia Topalova; Rima Turk
    Abstract: This paper examines the link between gender diversity in senior corporate positions and financial performance of 2 million companies in Europe. We document a positive association between corporate return on assets and the share of women in senior positions and establish two potential channels through which gender diversity may affect firm performance. The positive correlation is more pronounced in, first, sectors where women form a larger share of the labor force (such as the services sector) and, second, where complementarities in skills and critical thinking are in high demand (such as high-tech and knowledge-intensive sectors).
    Keywords: Euro Area;Gender diversity, senior management, firm performance, gender, women, female intensity, labor force, productivity, General, Economics of Gender, Public Policy, Personnel Economics: General,
    Date: 2016–03–07
  8. By: Itzhak Ben-David; Justin Birru; Andrea Rossi
    Abstract: We study trading patterns of corporate insiders in their own personal portfolios. To do so, we identify accounts of corporate insiders in a large dataset provided by a retail discount broker. We show that insiders overweight firms from their own industry. Furthermore, insiders earn substantial abnormal returns only on stocks from their industry, especially obscure stocks (small, low analyst coverage, high volatility). In a battery of tests, we find no evidence that corporate insiders use private information and conclude that insiders have an informational advantage in trading stocks from their own industry over outsiders to the industry.
    JEL: G11 G14
    Date: 2016–03
  9. By: Paul-Olivier KLEIN (LaRGE Research Center, Université de Strasbourg); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: This paper investigates the determinants for firms to choose sukuk over conventional bond. We investigate the potential impact of information asymmetries and adverse selection to explain why firms prefer using sukuk. We perform logit regressions of the choice of debt type to determine which characteristics lead a firm to issue a sukuk rather than a bond. We use a dataset of sukuk and conventional bond issuances in Malaysia from 2004 to 2013. We find evidence of the influence of information asymmetries and adverse selection on the choice of the sukuk market.
    JEL: G14 P51
    Date: 2016
  10. By: Jed Armstrong; Günes Kamber; Özer Karagedikli (Reserve Bank of New Zealand)
    Abstract: This Note presents a labour utilisation composite index (LUCI) for the New Zealand economy. We use principal component analysis to extract the underlying movements from a set of seventeen labour market variables. The LUCI fits the New Zealand business cycle well, and is particularly useful in situations when different labour market variables give contradictory signals, or when individual labour market variables have idiosyncratic movements.
    Date: 2016–04
  11. By: Bogdan Genchev (Boston College); Julie Holland Mortimer (Boston College)
    Abstract: Conditional pricing practices allow the terms of sale between a producer and a downstream distributor to vary with the ability of the downstream firm to meet a set of conditions put forward by the producer. The conditions may require a downstream firm to accept minimum quantities or multiple products, to adhere to minimum market-share requirements, or even to deal exclusively with one producer. The form of payment from the producer to the downstream firm may take the form of a rebate, marketing support, or simply the willingness to supply inventory. The use of conditional pricing practices is widespread throughout many industries, and the variety of contractual forms used in these arrangements is nearly as extensive as the number of contracts.
    Keywords: conditional pricing, terms of sale, downstream firm
    JEL: K11 K21 L4 L42
    Date: 2016–02–15
  12. By: Maurice J.G. Bun; Leo Huberts (University of Amsterdam)
    Abstract: In recent years there has been wide criticism of bonuses and performance pay in different forms. This can often be traced back to the recent financial crisis. Empirical evidence on the effects of bonuses and performance related pay is increasing. We contribute to the discussion by analyzing the impact of changes in the payment structure of a large Dutch marketing company. Specifically, we investigate the consequences for company sales of higher fixed pay in combination with lower bonuses. Exploiting shift level data of individual workers we find that average productivity decreases when the pay structure shifts more to fixed pay. Further analysis shows that this is a pure incentive effect and not due to sorting.
    Date: 2016–01–14
  13. By: Amiti, Mary (Federal Reserve Bank of New York); Itskhoki, Oleg (Princeton University); Konings, Jozef (Katholieke Universitei Leuven, National Bank of Belgium)
    Abstract: How strong are strategic complementarities in price setting across firms? In this paper, we provide a direct empirical estimate of firms’ price responses to changes in prices of their competitors. We develop a general framework and an empirical identification strategy to estimate the elasticities of a firm’s price response both to its own cost shocks and to the price changes of its competitors. Our approach takes advantage of a new micro-level data set for the Belgian manufacturing sector, which contains detailed information on firm domestic prices, marginal costs, and competitor prices. The rare features of these data enable us to construct instrumental variables to address the simultaneity of price setting by competing firms. We find strong evidence of strategic complementarities, with a typical firm adjusting its price with an elasticity of 35 percent in response to the price changes of its competitors and with an elasticity of 65 percent in response to its own cost shocks. Furthermore, we find substantial heterogeneity in these elasticities across firms, with small firms showing no strategic complementarities and a complete cost pass-through, and large firms responding to their cost shocks and competitor price changes with roughly equal elasticities of around 50 percent. We show, using a tightly calibrated quantitative model, that these findings have important implications for shaping the response of domestic prices to international shocks.
    Keywords: strategic complementarities; pass-through; exchange rates; prices; mark-up
    JEL: D22 E31 F31
    Date: 2016–03–01
  14. By: Vu, Hoang Nam; Doan, Quang Hung
    Abstract: Innovation is widely recognized as a key determinant of enterprise performance. It is, however, not clear how innovation affects performance of small-and-medium enterprises (SMEs) in transition economies. Based on data collected from surveys of SMEs in Vietnam from 2005 to 2011 this study shows that the human capital of owners/managers of SMEs, the quality of workers, and public physical infrastructure positively affect innovation and the performance of SMEs. More importantly, the study finds that innovation in products, production process, and marketing is a decisive factor for higher performance of SMEs in Vietnam.
    Keywords: Innovation, SMEs, Vietnam
    JEL: D22 J54 L11 L25 O3
    Date: 2015–01
  15. By: Giessner, S.R.
    Abstract: Organisational mergers are one of the most extreme forms of organisational change processes. Consequently, they often result in difficulties for employees to adjust to the altered organisational conditions. This is often reflected in low levels of employee identification with the post-merger organisation. As a result, merging organisations experience more conflict, less employee motivation, higher turnover and lower performance levels. These low levels of post-merger identification thus often put the strategic and financial goals of the merger at risk. I argue that an organisational behaviour perspective focusing on the management of identity levels during an organisational merger provides important practical insights for employee management. I will first explain why I am personally so fascinated by this topic. I will then present an identity management perspective on organisational mergers. Here, I will consider three key aspects: (1) Identity processes; (2) Intergroup structure; and (3) Leadership. I will conclude by giving an overview of the potential challenges and directions for future research in this field.
    Keywords: mergers, acquisitions, esprit de corps, identity management, post-merger identification, social identity, human resource management, employee adjustment, uncertainty
    JEL: G34 L22 M12 M14
    Date: 2016–04–01

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