nep-bec New Economics Papers
on Business Economics
Issue of 2016‒06‒04
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Product Switching and the Business Cycle By Andrew B. Bernard; Toshihiro Okubo
  2. Accounting for Productivity Dispersion over the Business Cycle By Kurtzman, Robert J.; Zeke, David
  3. The Value of Entrepreneurial Failures: Task Allocation and Career Concerns By Canidio, Andrea; Legros, Patrick
  4. Liquidity, Information Aggregation, and Market-Based Pay in an Efficient Market By Calcagno, Riccardo; Heider, Florian
  5. Governance and Performance in the U.S. Agri-Food Industry: A Comparative Study of Firms and Cooperatives By Grashuis, Jasper; Cook, Michael
  6. ‘Better late than never’: a longitudinal quantile regression approach to the interplay between green technology and age for firm growth By Riccardo Leoncini; Alberto Marzucchi; Sandro Montresor; Francesco Rentocchini; Ugo Rizzo
  7. Choice of strategic variables by relative profit maximizing firms in oligopoly By Satoh, Atsuhiro; Tanaka, Yasuhito
  8. Related variety, ownership, and firm dynamics in transition economies: the case of Hungarian city regions 1996-2012 By Izabella Szakálné Kanóa, Balázs Lengyel, Zoltán Elekes, Imre Lengyel; Balázs Lengyel; Zoltán Elekes; Imre Lengyel
  9. Does Managerial Experience in a Target Firm Matter for the Retention of Managers after M&As? By Kenjiro Hirata; Ayako Suzuki; Katsuya Takii
  10. Growing like Spain: 1995-2007 By Manuel García-Santana; Enrique Moral-Benito; Josep Pijoan-Mas; Roberto Ramos
  11. Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success By Rocha, Vera; van Praag, Mirjam C.; Folta, Timothy B.; Carneiro, Anabela
  12. Innovation and Firm Productivity: Evidence from the US Patent Data By Cui, Jingbo; Li, Xiaogang
  13. Complex Internationalization Strategies and Firm Export Dynamics: Crisis and Recovery By David Córcoles; Carmen Díaz-Mora*; Rosario Gandoy

  1. By: Andrew B. Bernard; Toshihiro Okubo
    Abstract: This paper explores role of product adding and dropping within manufacturing firms over the business cycle. While a substantial body of work has explored the importance of the extensive margins of firm entry and exit in employment and output flows, only recently has research begun to examine the adjustment across products within firms and its importance for firm and aggregate output and employment flows. Using a novel, annual firm-product data set covering all Japanese manufacturing firms with more than 4 employees from 1992 to 2006, we provide the first evidence on annual changes in product adding and dropping by continuing firms over the business cycle. We find very high rates of product adding and dropping by continuing firms between the last year of the recession and the first year of the subsequent expansion and offer an explanation and supporting evidence based on a "trapped factors" model of firm behavior.
    Keywords: product adding, product dropping, multi-product firms, trapped factors
    JEL: L11 E32 L21 L25 L60
    Date: 2016–05
  2. By: Kurtzman, Robert J.; Zeke, David
    Abstract: This paper presents accounting decompositions of changes in aggregate labor and capital productivity. Our simplest decomposition breaks changes in an aggregate productivity ratio into two components: A mean component, which captures common changes to firm factor productivity ratios, and a dispersion component, which captures changes in the variance and higher order moments of their distribution. In standard models with heterogeneous firms and frictions to firm input decisions, the dispersion component is a function of changes in the second and higher moments of the log of marginal revenue factor productivities and reflects changes in the extent of distortions to firm factor input allocations across firms. We apply our decomposition to public firm data from the United States and Japan. We find that the mean component is responsible for most of the variation in aggregate productivity over the business cycle, while the dispersion component plays a modest role.
    Keywords: Accounting Decomposition ; Business Cycles ; Misallocation ; Productivity
    JEL: D24 E32 L11
    Date: 2016–05–20
  3. By: Canidio, Andrea; Legros, Patrick
    Abstract: The task assignment that maximizes present expected output is not necessarily the most informative about an agent's comparative advantage at different tasks. Entrepreneurs are free to choose their task assignment-workers in firms are not. When labor market frictions are low, any surplus generated by a more informative task as- signment is captured by the worker, and firms maximize present expected output in their task assignment. Hence, agents may choose entrepreneurship to learn their comparative advantage. The opposite holds when labor market frictions are large. The model establishes a causal relation between the degree of labor market frictions, the value of entrepreneurial failures, the level of entrepreneurial activity, the degree of firms' short-termism, and the rate of within-firm talent discovery. The theoretical correlations between these variables are consistent with the evidence available for the US and continental Europe.
    Keywords: career concerns.; entrepreneurial failures; entrepreneurship; learning; organizational choice; task allocation
    JEL: D83 J24 J62 L26 M13
    Date: 2016–05
  4. By: Calcagno, Riccardo; Heider, Florian
    Abstract: This paper studies the usefulness of making the income of a CEO depend on the stock price of the firm he runs. We assume the stock market is efficient and find that other public information about CEO performance, e.g., accounting information, is not used to determine CEO pay. But because of the feedback loop between CEO actions and the stock price, the price does not fully reflect the consequences of CEO shirking for the value of the firm. The optimal incentive contract increases stock-based pay in order to increase the sensitivity of CEO income to shirking and thus deter it. This effect is stronger when traders have worse information, which can explain the prevalence of stock-based pay in hard-to-value firms. Our model derives a measure of the wedge between financial and economic efficiency, and generates new insights about the role of market conditions such as liquidity for optimal pay contracts.
    Keywords: efficient markets; information aggregation; liquidity; market-based pay
    JEL: D86 G14 G34
    Date: 2016–05
  5. By: Grashuis, Jasper; Cook, Michael
    Abstract: This paper presents a unique descriptive and empirical study of governance and performance in the U.S. agri-food industry with specific emphasis on the boards of directors of firms and cooperatives. Per the summary statistics, the average firm has more assets, more sales, and more profits, yet efficiency and profitability ratios indicate the average cooperative is superior. Using seven board and management characteristics, a three-stage least squares model is specified for two samples of 128 firms and 456 cooperatives in order to address the hypothesized endogenous nature of the governance-performance relationship. For the cooperative sample, the impact of board size on performance is estimated to be negative, while female directorship, director independence, and director ownership have a positive and significant causal relationship to various proxies of performance. Overall, in relation to financial performance, governance as proxied by board and management characteristics is concluded to be more impactful for the cooperative sample, which implies a significant difference between corporate and cooperative governance.
    Keywords: Governance, Agricultural Cooperative, Three Stage Least Squares, Comparative Study, Agribusiness, Industrial Organization, Q13, Q14, Q15,
    Date: 2016
  6. By: Riccardo Leoncini (University of Bologna (Italy); Freiburg Institute for Advanced Studies (FRIAS), University of Freiburg (Germany); IRCrES-CNR (Italy)); Alberto Marzucchi (Catholic University of Milan (Italy)); Sandro Montresor (Kore University of Enna (Italy)); Francesco Rentocchini (Southampton Business School, University of Southampton (UK)); Ugo Rizzo (University of Ferrara (Italy))
    Abstract: This paper investigates the relationships between green/non-green technologies and firm growth. By combining the literature on eco-innovations with industrial organisation and entrepreneurial studies, this relationship is investigated by considering its dependence on the pace at which firms grow and the moderating role of age. Based on a sample of 5498 manufacturing firms in Italy for the period of 2000-2008, we estimate longitudinal fixed effects quantile models in which age is set to moderate the effects of green and non-green patents on employment growth. The results indicate a positive role of green technologies in growth greater than the effect of non-green technologies. This result is valid with the exception of struggling and rapidly growing firms: the relevance of moderately growing firms thus emerges in contrast to the more celebrated “elite of superstar” growing companies. Age plays a moderating role in the growth effects of green technologies. Not completely inconsistent with the extant literature, this moderation effect is positive, indicating the importance of firm experience in benefiting from green technologies in terms of growth, possibly relative to the complexity of their management.
    Keywords: green technology; firm growth; age; quantile fixed effects
    JEL: L26 O33 Q55
    Date: 2016–05
  7. By: Satoh, Atsuhiro; Tanaka, Yasuhito
    Abstract: This paper studies the choice of strategic variables by firms in a symmetric oligopoly in which each firm produces differentiated goods and maximizes its relative profit that is the difference between its profit and the average profit of the other firms. We consider a two stage game such that in the first stage the firms choose their strategic variables, quantity or price, and in the second stage they determine the values of their strategic variables. We show that the choice of strategic variables is irrelevant in the sense that the equilibrium quantities and prices are the same in all firms whichever each firm chooses in the first stage, so any combination of strategy choice by the firms constitutes a sub-game perfect equilibrium in the two stage game.
    Keywords: relative profit maximization, oligopoly
    JEL: D43
    Date: 2016–01–01
  8. By: Izabella Szakálné Kanóa, Balázs Lengyel, Zoltán Elekes, Imre Lengyel; Balázs Lengyel; Zoltán Elekes; Imre Lengyel
    Abstract: We investigate the effect of related variety on the entry and exit patterns of domestic and foreign firms in Hungarian city regions from 1996-2012. In order to characterize the archetypes of interaction between domestic and foreign firms, we introduce three alternative models to calculate the related variety. The best fit is provided by the model, in which no interaction among foreign and domestic firms is presumed. Related variety in the foreign subset tends to accelerate firm entry and decelerate firm exit in a much earlier stage of economic transition than related variety across domestic firms.
    Keywords: related variety, firm entry and exit, foreign-owned firms, panel logistic regression, dual economy
    JEL: F43 F23 L16
    Date: 2016–05
  9. By: Kenjiro Hirata (Faculty of Economics, Kobe International University); Ayako Suzuki (School of International Liberal Studies, Waseda University); Katsuya Takii (Osaka School of International Public Policy (OSIPP), Osaka University)
    Abstract: This paper examines how managers' tenures in target firms influence their probability of retention as board members after mergers or acquisitions in Japanese firms. It develops a model that distinguishes several hypotheses about the effect of tenure on separation. Our results suggest that experience as an employee increases firm-specific skills, but at the expense of the ability to learn new skills. However, experience as a board member does not have this effect in Japanese firms, the structure of which is known to encourage specific skills. Further, we provide a novel method to correct for selection biases when using data on managers.
    Keywords: Tenure, Retention of Managers and Post M&As
    JEL: G34 M5 J62
    Date: 2016–05
  10. By: Manuel García-Santana; Enrique Moral-Benito; Josep Pijoan-Mas; Roberto Ramos
    Abstract: Spanish GDP grew at an average rate of 3.5% per year during the expansion of 1995-2007, well above the EU average of 2.2%. However, this growth was based on factor accumulation rather than productivity gains as TFP fell at an annual rate of 0.7%. Using firm-level administrative data for all sectors we show that deterioration in the allocative efficiency of productive factors across firms was at the root of the low TFP growth in Spain, while misallocation across sectors played only a minor role. Cross-industry variation reveals that the increase in misallocation was more severe in sectors where government in fluence is more important for business success, which represents novel evidence on the potential macroeconomic costs of crony capitalism. In contrast, sectoral differences in financial dependence, skill intensity, innovative content, tradability, or capital structures intensity appear to be unrelated to changes in allocative efficiency. All in all, the observed high output growth together with increasing firm-level misallocation in all sectors is consistent with an expansion driven by a demand boom rather than by structural reforms.
    Keywords: TFP, Misallocation, Spain.
    JEL: D24 O11 O47
    Date: 2016–02
  11. By: Rocha, Vera (Copenhagen Business School); van Praag, Mirjam C. (Copenhagen Business School); Folta, Timothy B. (University of Connecticut); Carneiro, Anabela (University of Porto)
    Abstract: The founder (team)'s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder's choice of the initial workforce's human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.
    Keywords: human capital, entrepreneurship, startups, firm performance
    JEL: J24 L26 M13
    Date: 2016–04
  12. By: Cui, Jingbo; Li, Xiaogang
    Keywords: Productivity, Backward Citations, Innovation, Knowledge Stock, Industrial Organization, Productivity Analysis, Research and Development/Tech Change/Emerging Technologies, d22, O31,
  13. By: David Córcoles (University of Castilla-La Mancha); Carmen Díaz-Mora* (University of Castilla-La Mancha); Rosario Gandoy (University of Castilla-La Mancha)
    Abstract: The aim of this paper is to investigate the dynamics of the exporting activity of manufacturing firms that are involved in complex internationalization strategies. We consider complex internationalization to be when firms are simultaneously active in exporting, importing intermediates and international production, which are typically associated with participation in GVCs. Our descriptive data show that these triple mode internationalized firms belong to an elite group of firms that exhibit a higher level of labour productivity, are larger and show a higher likelihood of engaging in product innovation. On the basis of the estimation of a random-effects probit model with panel data, we find that once such firm characteristics are controlled for, internationalization complexity plays an important role in continuing to export. Additionally, the results from a dynamic panel data model show that being involved in more sophisticated internationalization modes positively influences the level of exports. Thus, it seems that firms active in a complex mix of internationalization strategies have an added advantage which enables them to confront the uncertainty of foreign markets in better conditions and translates to a lower likelihood of ceasing exporting and to higher export values. We go one step further and investigate whether the impact is different during the trade collapse in 2009 and the following recovery.
    Keywords: Export dynamics, firms' characteristics, complex internationalization, trade collapse and recovery
    Date: 2016–05

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