nep-bec New Economics Papers
on Business Economics
Issue of 2016‒10‒23
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Global Firms By Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
  2. Vertical differentiation and collusion: pruning or proliferation? By Jean Gabszewicz, Jean; Marini, Marco A.; Tarola, Ornella
  3. Taxation or subsidization policy for new technology adoption in oligopoly By Hattori, Masahiko; Tanaka, Yasuhito
  4. Gender Quota inside the Boardroom: Female Directors as New Key Players? By Antoine Rebérioux; Gwenaël Roudaut
  5. Job Creation and the Role of Dependencies By Fornaro, Paolo; Luomaranta, Henri
  6. Multi-Dimensional Effects of International Trade: The Experience of Chinese Manufacturers By Grieco, Paul L. E.; Li, Shengyu; Zhang, Hongsong
  7. Firm dynamics with frictional product and labor markets By Bihemo Kimasa; Leo Kaas
  8. Emissions trading and productivity: Firm-level evidence from German manufacturing By Lutz, Benjamin Johannes
  9. The political economy of interregional competition for firms By Daniel Hopp; Michael Kriebel
  10. Technology and Production Fragmentation: Domestic versus Foreign Sourcing By Teresa C. Fort
  11. An anatomy of Italian cities: evidence from firm-level data By Andrea Lamorgese; Andrea Petrella
  12. Initial Public Offerings and the Firm Location By Giulia Baschieri; Andrea Carosi; Stefano Mengoli
  13. A Generalized Model of Sales By Sandro Shelegia; Chris M. Wilson
  14. Information Technology and Global Sourcing By Fromenteau, Phillipe

  1. By: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
    Abstract: Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now-standard heterogeneous firm model posits measure zero firms that compete under monopolistic competition and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and account for substantial shares of aggregate trade. We develop a new theoretical framework that allows firms to have large market shares and to decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. Using U.S. firm and trade transactions data, we provide strong evidence in support of this framework's main predictions of interdependencies and complementarities between these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics, and increasing their shares of aggregate trade.
    JEL: F12 F14 L11 L21
    Date: 2016–10
  2. By: Jean Gabszewicz, Jean; Marini, Marco A.; Tarola, Ornella
    Abstract: In this paper, we tackle the dilemma of pruning versus proliferation in a vertically differentiated oligopoly under the assumption that some firms collude and control both the range of variants for sale and their corresponding prices, likewise a multi-product firm. We analyse whether pruning emerges and, if so, a fighting brand is marketed. We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market. Under pruning, these firms commercialize a fighting brand only when facing competitors in a low-end market.
    Keywords: Vertically Differentiated Markets, Cannibalization, Market Pruning, Price Collusion.
    JEL: D4 D42 D43 L1 L12 L13 L4 L41
    Date: 2016–10–15
  3. By: Hattori, Masahiko; Tanaka, Yasuhito
    Abstract: Adoption of new technology by firms is very important for economic growth of a country. However, it may be insufficient or excessive in less competitive industries from the point of view of social welfare. Then, subsidization or taxation by the government is necessary. We present an analysis about subsidy or tax policy for adoption of new technology in an oligopoly with a homogeneous good. The unit cost with the new technology is lower than that with the present technology, but each firm must expend a fixed set-up cost to adopt and use the new technology. We will show that if the number of firms is small, and the set-up cost is large, subsidization to promote adoption of new technology may be the optimum policy. However, if the number of firms is not so small, or the set-up cost is not so large, taxation to prevent adoption of new technology is likely to be the optimum policy.
    Keywords: subsidy or tax policy, new technology adoption, oligopoly
    JEL: D43 L13
    Date: 2016–10–13
  4. By: Antoine Rebérioux (LADYSS - Laboratoire dynamiques sociales et recomposition des espaces - UP1 - Université Panthéon-Sorbonne - UPOND - Université Paris Ouest Nanterre La Défense - UP8 - Université Paris 8, Vincennes-Saint-Denis - UP7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique); Gwenaël Roudaut (Ecole Polytechnique [Palaiseau] - Ecole Polytechnique)
    Abstract: This paper examines whether women’s situation within French boards has improved following the adoption of a board-level gender quota in 2011. To do so, we focus on the individual role of female directors as proxied by their fees. Our sample includes the listed companies belonging to the SBF120 index over the 2006-2014 period. We first show that the quota has succeeded in opening the doors of boardrooms to new, unseasoned female directors (not present on the director labor market before the regulation). These unseasoned female directors have distinctive characteristics (in terms of independence, experience, age, nationality, etc.) as compared to other board members. More importantly, we show that women, whether unseasoned or seasoned, experience an inner glass ceiling, with “positional” gender segregation within French boards. In particular, companies have failed so far to open the access of the most important board committees (namely monitoring committees: audit, compensation and nomination) to women. It results in a within-firm gender fees gap of 5%. Overall, the quota has rather amplified this segregation process, with an increase in the average within-firm gender fees gap.
    Keywords: board, committees, gender quota, segregation, director fees
    Date: 2016–03–31
  5. By: Fornaro, Paolo; Luomaranta, Henri
    Abstract: We contribute to the extensive literature on the relationship between firm size and job creation, by examining the effects of dependencies between enterprises. Using Finnish monthly data encompassing the population of Finnish private businesses, we calculate the gross job creation and destruction, together with the net job creation, for different size classes and industries. Importantly, we divide firms into a dependent (i.e. owned, at least partially, by a large company) and independent category. Due to the quality of the data, we are able to isolate the 'organic' growth of firms, disregarding the effects of mergers, split-offs and other legal restructuring. We find that independent companies have shown a considerably higher net job creation, regardless of their size class. However, dependent firms do not show particularly different behaviors with respect to the sensitivity to aggregate conditions, compared to their independent counterparts. Once we control for age, we find that independent firms generate more (net) jobs during the early years of their existence but destroy more jobs once they become older.
    Keywords: Dependencies, firm size, firm age, employment creation
    JEL: D22 E24 E32 L25
    Date: 2016–10–13
  6. By: Grieco, Paul L. E. (Department of Economics, The Pennsylvania State University); Li, Shengyu (Business School, Durham University); Zhang, Hongsong (Faculty of Business and Economics, The University of Hong Kong)
    Abstract: This paper evaluates the e ect of importing and exporting on firm-level productivity and intermediate input prices for Chinese manufacturing firms. Using a rich data set from Chinese manufacturers from 2000 to 2006, we find that international trade a ects firms through two channels: productivity growth and intermediate input prices. Both importing and exporting tend to increase firm productivity; in contrast, while export leads to higher input prices, importing firms enjoy lower input prices (presumably due to the expanded choice of inputs). We consistently estimate production functions in the presence of unobserved input price dispersion when firms may sell to both domestic and foreign markets. This allows us to jointly recover firm-level productivity and input prices for each firm. We use these values to investigate the sources of gains from international trade at the firm level. We also find that firms with higher productivity and lower input prices are more likely to export and import, and tend to export and import more.
    Keywords: Input Prices, Productivity, International Trade, Gain
    JEL: D24 F14 L11
    Date: 2015–04–24
  7. By: Bihemo Kimasa (University of Konstanz); Leo Kaas (University of Konstanz)
    Abstract: We examine empirically and theoretically the joint dynamics of prices, output, employment and wages across firms. We first analyze administrative firm data for the German manufacturing sector for which price and quantity information at the nine-digit product level, together with employment, working hours and wages are available. We then develop a dynamic model of heterogeneous firms who compete for workers and customers in frictional labor and product markets. Prices and wages are dispersed across firms, reflecting differences in firm productivity and demand. Productivity and demand shocks have distinct implications for the firms' employment, output and price adjustments. In a quantitative analysis, we evaluate the model predictions against the data.
    Date: 2016
  8. By: Lutz, Benjamin Johannes
    Abstract: I study the causal effect of the European Union Emissions Trading System (EU ETS) on the productivity of German manufacturing firms. Using administrative firm-level data, I estimate robust production functions for narrowly defined industries. This approach allows for an endogenous dynamic productivity process and corrects for simultaneous changes in input use or productivity after a firm is regulated by the EU ETS. After estimating the firm specific productivity, I employ a difference-in-differences framework in order to identify and quantify the average treatment effect of the EU ETS on the productivity of regulated firms. The results suggest no significant negative effect of the EU ETS on productivity. In contrast, the EU ETS had a positive effect on productivity during the first compliance period. An alternative identification strategy based on a combination of the difference-in-differences framework and nearest neighbor matching supports this finding. A subsample analysis provides evidence that the effect of the EU ETS is heterogeneous across industries.
    Keywords: Control of Externalities,Emissions Trading,Robust Production Function Estimation,Productivity,Difference-in-Differences
    JEL: D22 D24 Q52
    Date: 2016
  9. By: Daniel Hopp; Michael Kriebel
    Abstract: This paper studies interregional competition for firms when the bidding is decided upon majority voting. We model the competition as an auction under full information between two asymmetric regions inhabited by low- and high-skilled individuals. We derive two results: First, the location decision is inefficient in most cases, especially when the median voter is high-skilled. Second, winning the auction is harmful for the region if the political process and a strong competition lead to subsidies which exceed the surplus created by a firm's location. This implies that restricting interregional competition for firms, e.g. regulating subsidies, may enhance welfare. Furthermore, our model shows that countries with high redistributive taxes and a low-skilled majority have an advantage to attract foreign firms.
    Keywords: median voter, political economy, subsidy competition, spillover
    JEL: H23 H25 H31 P16 R11
    Date: 2016–10
  10. By: Teresa C. Fort
    Abstract: This paper provides direct empirical evidence on the relationship between technology and firms’ global sourcing strategies. Using new data on U.S. firms’ decisions to contract for manufacturing services from domestic or foreign suppliers, I show that a firm’s adoption of communication technology between 2002 to 2007 is associated with a 3.1 point increase in its probability of fragmentation. The effect of firm technology also differs signifcantly across industries; in 2007, it is 20 percent higher, relative to the mean, in industries with production specifcations that are easier to codify in an electronic format. These patterns suggest that technology lowers coordination costs, though its effect is disproportionately higher for domestic rather than foreign sourcing. The larger impact on domestic fragmentation highlights its importance as an alternative to offshoring, and can be explained by complementarities between technology and worker skill. High technology firms and industries are more likely to source from high human capital countries, and the differential impact of technology across industries is strongly increasing in country human capital.
    Keywords: fragmentation, offshoring, technology, contract manufacturing services
    JEL: F14 F23 L23
    Date: 2016–01
  11. By: Andrea Lamorgese (Bank of Italy); Andrea Petrella (Bank of Italy)
    Keywords: urban productivity premium, agglomeration, urban growth
    JEL: D24 O47 R30 A A A
    Date: 2016–10
  12. By: Giulia Baschieri (Dept. of Management, Università Ca' Foscari Venice); Andrea Carosi (Dept. of Economics and Business, University of Sassari); Stefano Mengoli (Dept. of Management, University of Bologna)
    Abstract: .
    Keywords: IPO, Going Public Decision, Underpricing, Long-run Under-performance, Firm Location.
    JEL: G10 G14 G32 G24
    Date: 2016–10
  13. By: Sandro Shelegia; Chris M. Wilson
    Abstract: To provide a more exible workhorse model of temporary price reductions or "sales", this paper presents a substantially generalized "clearinghouse" sales framework. Our framework permits multiple dimensions of firm heterogeneity, and views firms as competing directly in utility rather than prices. The paper i) reproduces and extends many equilibria from the existing literature, ii) offers a range of new results on how firm heterogeneity affects market outcomes, iii) provides original insights into the number and type of firms that use sales, and iv) extends a "cleaning" procedure that is commonly used in empirical studies of sales and price dispersion.
    Keywords: sales; price dispersion; advertising; clearinghouse; heterogeneity
    JEL: L13 D43 M3
    Date: 2016–10
  14. By: Fromenteau, Phillipe
    Abstract: This paper examines how IT influences global sourcing decisions. It develops a theoretical model to study how IT determines the decisions of firms located in the high-wage North whether to offshore production to a low-wage country in the South. Offshoring to South however is subject to costly communication reflected by partially incomplete contracting. More sophisticated IT allows more efficient communication between the Northern headquarter and its Southern intermediate input supplier and alleviates contractual frictions. The model provides several predictions about the impact of IT on the organization of the global supply chain. Complex industries for which codifiability and verifiability of information is a much harder task, are more likely to source intermediate inputs in countries with more efficient IT infrastructure. Considering the mode of firm organization, more efficient IT infrastructure is expected to reduce the share of intra-firm trade in more complex industries. These predictions are examined and validated using disaggregated industry-level trade data. Most importantly, these findings are robust to controlling for well-known sources of comparative advantage and determinants of firm organization such as factor endowments, financial development and contract enforcement.
    Keywords: Information Technology; Global Sourcing; Multinational Firm; Firm Organization; Tasks
    JEL: D23 F14 F23 L23 O33
    Date: 2016–07

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