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on Business Economics |
| By: | Adam Szeidl; Jing Cai |
| Abstract: | We organize regular business meetings for randomly selected managers of young Chinese firms to study the effect of business networks on firm performance. We randomize 2,800 managers into several groups that hold monthly meetings for one year, and a "no-meetings" control group. We find that: (1) The meetings increase firm revenue by 7.8 percentage points, and also significantly increase profit, a management score, employment, and the number of business partners; (2) These effects persist one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibit higher growth. We exploit additional interventions to document concrete channels: (4) Peers share exogenous business-relevant information, particularly when they are not competitors, showing that the meetings facilitate learning; (5) Managers create more business partnerships in the regular than in other one-time meetings, showing that the meetings improve firm-to-firm matching. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00562&r=bec |
| By: | Huu Thanh Tam Nguyen (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne); Ngoc-Sang Pham (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We consider a small open economy with two productive sectors (an old and a new). There are two types of firms in the new industry: a well planted multinational firm and a potential domestic firm. Our framework highlights a number of results. First, in a poor country with low return of training and weak FDI spillovers, the domestic firm does not exist in the new industry requiring a high fixed cost. Second, once the host economy has the capacity to create the new firm, the productivity of the domestic firm is the key factor allowing it to enter into the new industry, and even eliminate the multinational firm. Interestingly, in some cases where FDI spillovers are strong, the country should invest in the new industry, but not train specific workers. Last, credit constraints and labor/capital shares play important roles in the competition between the multinational firm and the domestic one. |
| Keywords: | FDI spillovers,investment in training,heterogeneous firms,entry cost |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01147485&r=bec |
| By: | Po-Hsin Ho (National Taipei University) |
| Abstract: | This study further investigates the corporate investment decisions made by overconfident CEOs. The effect of overconfident CEOs on corporate investment decisions is widely examined in recent literature (Malmendier and Tate, 2005, 2008; Hirshleifer, Low, and Teoh, 2012; Chen, Ho and Ho, 2014; Ferris, Jayaraman, and Sabberwa, 2013; Kolasinski and Li, 2013). The literature indicates that overconfident CEOs overinvest. In a recent article, Kolasinski and Li (2013) find well governed firms could mitigate the overinvestment problem caused by overconfident CEOs. However, the literature ignores the role of product market competition in corporate investment decisions. Giround and Mueller (2010, 2011) find that competitive industries can substitute corporate governance to force managers to work hard. This study thus examines the influence of market competition on managerial overconfidence and reexamines the investment-cash sensitivity and merger activities of overconfident CEOs. We propose two competing hypotheses to study whether the investment behavior of overconfident CEOs differs under different competition structures. Our findings suggest that intense market competition mitigates the overinvestment and merger tendency of overconfident CEOs. |
| Keywords: | Product market competition; Overconfident CEOs; Investment decision |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4206397&r=bec |
| By: | Andrea Prat; Claudine Gartenberg; Steven Blader |
| 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 initiative to remake its internal operations. This first phase corresponds to an overhaul of the relational contract with its employees, focusing exclusively on changing values 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. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00553&r=bec |
| By: | Nathan, Dev.; Saripalle, Madhuri.; Gurunathan, L. |
| Abstract: | It is well-known that labour practices, which cover terms of employment and working conditions in a broad sense, vary greatly amongst firms of the same sector. Much less is known, however, on the factors determining or explaining labour practices at the firm level. To some extent, technology and tasks determine or sets limits to the types of labour practices that can be used by a firm. But the firm’s strategy in product markets, improving services quality and choosing cost saving techniques also play a role in firm decisions on labour practices. This paper analyses case studies of labour practices in a dozen firms in India, as well as explanatory factors of production strategies in these firms. It identifies three main labour practice systems – the operator system, the quality circle of high employee involvement, and that of the semi- autonomous work team. Within each of these labour systems, there are also instances of better practices. |
| Keywords: | work organization, work performance, skilled worker, labour contract, labour cost, case study, labour policy, India |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ilo:ilowps:994936193302676&r=bec |
| By: | Marcus Biermann |
| Abstract: | What is the effect of trade on the size distribution of firms? We collect historical data between 1882 and 1907 from the German Empire to address this question. Our data allow us to match three data sets according to the same geographic boundaries: industry census data, railway and waterway trade data. The key findings are that trade integration impacts the firm size distribution heterogeneously across three size categories. We find evidence of a stark shift in employment and firm share from small and medium firms towards larger firms. A "Bartik" instrument is proposed to argue that the correlations described are indeed causal. We provide evidence for a fall in transport costs and technology adoption as mechanisms to explain the stylized facts observed in the data |
| Keywords: | Firm size distribution, firm heterogeneity, technology adoption, German Empire |
| JEL: | F14 F15 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1450&r=bec |
| By: | Troeger, Tobias H.; Walz, Uwe |
| Abstract: | We analyze a hand-collected dataset of 1669 executive compensation packages at 34 firms included in the main German stock market index (DAX) for the years 2006- 2014 in order to investigate the impact of the 2009 say on pay legislation. First, we observe that the compensation packages of management board members of Germany's DAX30-firms are closely linked to key performance measures such as return-onassets and EBIT. Second, our analysis indicates that ownership concentration has no significant effect on compensation, which can be read as support of the view that managerial self-serving by usurping the payroll is largely absent even where companies exhibit dispersed share ownership. Third, and most important for our topic, our findings suggest that it pays a lot to take a closer look to the contractual set-up of the compensation schemes. When considering only the overall board members' compensation, the hypothesis of lower remuneration in case of low shareholder support for compensation packages in say on pay-votes can be rejected. Our findings do not support this view, which is not at all surprising given the rather rigid contractual framework for the compensation of management board members. However, we find that the supervisory board seems to be responsive to say on pay-votes when it comes to the design of newly entering candidates. |
| Keywords: | executive compensation,say on pay,Germany |
| JEL: | D23 G30 G34 J33 K22 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:125r&r=bec |
| By: | Planer-Friedrich, Lisa; Sahm, Marco |
| Abstract: | We compare the strategic potential of Corporate Social Responsibility (CSR) and Customer Orientation (CO) as commitments to larger quantities in Cournot competition, modeled as a multi-stage game. First, in addition to profits, firms can choose to care for the surplus of either all consumers (CSR) or their own customers only (CO). Second, they decide upon the weight of this additional objective. We find that firms prefer to care for all consumers, choosing positive levels of CSR. This result provides an explanation for the recent shift from CO to CSR in both, corporate culture and economic research. |
| Keywords: | Corporate Social Responsibility,Customer Orientation,Cournot Duopoly,Commitment |
| JEL: | D43 L13 L21 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:116&r=bec |
| By: | Maarten Dossche (European Central Bank - ECB); Vivien Lewis (Department of Economics, KU Leuven); Céline Poilly (AMSE - Aix-Marseille School of Economics - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - EHESS - École des hautes études en sciences sociales) |
| Abstract: | Intra-firm bargaining between a multiple-worker firm and an individual employee leads to overhiring. Taking advantage of the decreasing returns to scale in employment, the firm can reduce the marginal product by hiring an additional worker, thereby reducing the bargaining wage paid to all existing employees. We show that this externality is amplified when firms can adjust hours per worker as well as employment. Hours are too low at the steady state. This misallocation of labor leads to sizeable welfare losses. Our finding is important for economies in which hours adjustment play an important role as it does in many Euro Area countries. |
| Keywords: | intra-firm bargaining,distortions,optimal monetary policy |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01367174&r=bec |
| By: | E. Bacchiega; O. Bonroy; E. Petrakis |
| Abstract: | We study the optimal contract choice of an upstream monopolist producing an essential input that may sell to two vertically differentiated downstream firms. The upstream supplier can offer an exclusive contract to one of the firms or non-exclusive contracts to both firms. Each of the latter can be made contingent or not on the breakdown of the negotiations between the upstream supplier and the rival downstream firm. The distribution of bargaining power during the contract terms negotiations is the main driving force of the monopolist's choices. A powerful supplier always opts for an exclusive contract. By contrast, a weaker supplier offers non-exclusive contracts and makes each of them contingent or non-contingent such as to guarantee the most favorable outside option in its negotiations. Our main results hold under an horizontally differentiated downstream market too. |
| JEL: | D43 L13 L14 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp1079&r=bec |