nep-bec New Economics Papers
on Business Economics
Issue of 2016‒10‒30
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  2. Survival of Entrepreneurial Firms: The Role of Agglomeration Externalities By Tavassoli, Sam; Jienwatcharamongkhol, Viroj
  3. Firm Dynamics and Residual Inequality in Open Economies By Julien Prat; Gabriel Felbermayr; Giammario Impullitti
  4. Firm Level Allocative Inefficiency: Evidence from France By Lionel Fontagné; Gianluca Santoni
  5. Management practices and productivity in Germany (Managementpraktiken und Produktivität in Deutschland) By Broszeit, Sandra; Fritsch, Ursula; Görg, Holger; Laible, Marie-Christine
  6. Competitiveness and subsidy or tax policy for new technology adoption in duopoly By Hattori, Masahiko; Tanaka, Yasuhito
  7. Multinational retailers and host countries’ export competitiveness By Cheptea, Angela
  8. Contract contingency in vertically related markets By Bacchiega, Emanuele; Bonroy, Olivier; Petrakis, Emmanuel
  9. Endogenous Growth in Production Networks By Stanislao Gualdi; Antoine Mandel
  10. Welfare analysis and policy implications in Melitz-type model where markup differs across industries By Kazuyoshi Ohki;
  11. Import Competition and the Composition of Firm Investments By Fromenteau, Philippe; Schymik, Jan; Tscheke, Jan

  1. By: Zouaghi, Ferdaous; Hirsch, Stefan; Garcia, Mercedes Sanchez
    Abstract: Strategic management research has demonstrated the importance of firm resources and industry structure as drivers of profitability. However, less is known about how factors related to firms´ geographical locations affect profitability. In this article, we estimate firm-, industry-, year-, and region-specific effects on agri-food firm profitability in Spain. We apply the multilevel approach of Hierarchical Linear Modeling to a sample of 3,273 agri-food firms operating in different geographical districts during the time span 2006-2013. The results reveal the dominance of firm-specific effects which contribute up to 48.8% to variance in profitability. Moreover, firm size, growth, financial risk as well as innovation activity turn out as significant profit drivers. Although firm-effects have a stronger impact than industry affiliation and location, the results indicate that structural industry factors such as concentration and size as well as territorial factors such as regional education and unemployment influence profitability. Moreover, location in rural districts is not necessarily a handicap for firm profitability.
    Keywords: agri-food profits, hierarchical linear model, location effects, Agribusiness, Industrial Organization, Research Methods/ Statistical Methods,
    Date: 2016
  2. By: Tavassoli, Sam (CIRCLE, Lund University); Jienwatcharamongkhol, Viroj (Department of Economics, Lund University)
    Abstract: This paper analyzes the role of various types of agglomeration externalities on the survival rate of entrepreneurial firms. In particular, we trace the population cohort of newly-established and self-employed Swedish firms in the Knowledge-Intensive Business Service (KIBS) sector in 1997 up to 2012 and investigate the role of Marshallian and Jacobian externalities on the survival of these firms. We find that only Jacobian externalities (diversity) is positively associated with the survival of entrepreneurial firms. Not all Jacobian externalities matter though. Only the higher the “related variety” of the region in which an entrepreneurial firm is founded, the higher will be the survival chance of the firm, while “unrelated variety” barely has any significant correlation. The result is robust after controlling for extensive firm characteristics and individual characteristics of the founders. The main message here is: for a newly-established entrepreneurial firm, not only it matters who you are, but also where you are.
    Keywords: Entrepreneurial firms; region; agglomeration externalities; survival analysis; related variety; unrelated variety
    JEL: J24 L26 R12
    Date: 2016–10–19
  3. By: Julien Prat (CREST); Gabriel Felbermayr (University of Munich and Ifo Institute); Giammario Impullitti (University of Nottingham)
    Abstract: Increasing wage inequality between similar workers plays an important role for overall inequality trends in industrialized societies. To analyze this pattern, we incorporate directed job search into a dynamic model of international trade with heterogeneous firms and homogeneous workers. Wage inequality across and within firms results from their different hiring needs along their life cycles and the convexity of their adjustment costs. The interaction between wage posting and firm growth explains some recent empirical regularities on firm and labor market dynamics. Fitting the model to capture key features obtained from German linked employer-employee data, we investigate how falling trade costs and institutional reforms interact in shaping labor market outcomes. Focusing on the period 1996-2007, we find that neither trade nor key features of the Hartz labor market reforms account for the sharp increase in residual inequality observed in the data but can explain the fall in unemployment. By contrast, inequality appears highly responsive to the increase in product market competition possibly triggered by domestic regulatory reform.
    Date: 2016
  4. By: Lionel Fontagné (PSE - 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: Broszeit, Sandra (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Fritsch, Ursula; Görg, Holger; Laible, Marie-Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Based on a novel dataset, the 'German Management and Organizational Practices' (GMOP) Survey, we calculate establishment specific management scores following Bloom and van Reenen as indicators of management quality. We find substantial heterogeneity in management practices across establishments in Germany, with small firms having lower scores than large firms on average. We show a robust positive and economically important association between the management score and establishment level productivity in Germany. This association increases with firm size. Comparison to a similar survey in the US indicates that the average management score is lower in Germany than in the US. Overall, our results point towards lower management scores being at least in part to blame for the differences in aggregate productivity between Germany and the US." (Author's abstract, IAB-Doku) ((en))
    JEL: D24 L2 M2
    Date: 2016–10–17
  6. By: Hattori, Masahiko; Tanaka, Yasuhito
    Abstract: We consider a problem of subsidy or tax policy for new technology adoption by duopolistic firms. The technology is developed in and transferred by a foreign country to the domestic country. It is free but each firm must expend some fixed set-up cost for education of its staff to adopt and use it. Assuming that each firm maximizes the weighted average of absolute and relative profits, we examine the relationship between competitiveness and subsidy or tax policies for technology adoption, and show that when firm behavior is not competitive (the weight on the relative profit is small), the optimal policy of the government may be taxation; when firm behavior is competitive (the weight on the relative profit is large), the optimal policy is subsidization or inaction and not taxation. However, if firm behavior is extremely competitive (close to perfect competition), taxation case re-emerges.
    Keywords: new technology adoption, duopoly, subsidy, tax
    JEL: D43 L13
    Date: 2016–10–21
  7. By: Cheptea, Angela
    Abstract: The paper investigates how the overseas activity of multinational retailers (MRs) affects the global export patters of host country firms. Recent empirical work testifies that the entry of foreign retailers leads to a productivity upgrade in the domestic upstream sectors. Combined with the main result of the new new international trade theory on firm heterogeneity, an increase in the export capacity of local firms should follow. The current paper establishes a connection between these empirically identified effects and the new theory of international trade with heterogeneous firms and intermediaries. Two mechanisms are analyzed. First, the higher productivity at industry and firm level leads to an increase in the overall export capacity of local firms. Second, the expansion of transnational retail networks reinforces trade between host countries.
    Keywords: multinational retailers, export patterns, productivity gains, transnational networks, intermediaries, International Relations/Trade,
    Date: 2016
  8. By: Bacchiega, Emanuele; Bonroy, Olivier; Petrakis, Emmanuel
    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.
    Keywords: Vertical relationships, exclusive vs. non-exclusive relationships, contract contingency, two-part tariff, product differentiation, International Relations/Trade,
    Date: 2016
  9. By: Stanislao Gualdi (CentraleSupélec); Antoine Mandel (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We investigate the interplay between technological change and macroeconomic dynamics in an agent-based model of the formation of production networks. On the one hand, production networks form the structure that determines economic dynamics in the short run. On the other hand, their evolution reflects the long-term impacts of competition and innovation on the economy. We account for process innovation via increasing variety in the input mix and hence increasing connectivity in the network. In turn, product innovation induces a direct growth of the firm's productivity and the potential destruction of links. The interplay between both processes generate complex technological dynamics in which phases of process and product innovation successively dominate. The model reproduces a wealth of stylized facts about industrial dynamics and technological progress, in particular the persistence of heterogeneity among firms and Wright's law for the growth of productivity within a technological paradigm. We illustrate the potential of the model for the analysis of industrial policy via a preliminary set of policy experiments in which we investigate the impact on innovators' success of feed-in tariffs and of priority market access.
    Keywords: Production network,Network formation,Scale-free networks,Firms demographics,distribution of firms' size,Zipf law,general equilibrium,monopolistic competition,disequilibrium
    Date: 2016–04
  10. By: Kazuyoshi Ohki;
    Abstract: We construct a monopolistic competition model considering different markups across industries and firm-level heterogeneity of productivity. An excess entry occurs in low-markup (competitive) industry, and vice versa in high-markup (non-competitive) industry. To achieve the optimum allocation, a social planner should implement an appropriate mix of policies, whose requirement is tighter than the homogeneous-firm model under some situations. The total amount of optimum subsidy (tax) is dependent on the property of distribution when the elasticity of substitution between industries is above unity.
    Date: 2016–10
  11. By: Fromenteau, Philippe; Schymik, Jan; Tscheke, Jan
    Abstract: We study how foreign competition affects the composition of investments inside firms. A parsimonious model predicts that firms have an incentive to shift their investments towards more short-term assets when exposed to tougher competition. Using data on expenditures of listed US companies into various asset classes with different lifespans, we document empirical evidence that is consistent with this prediction. Over a fifteen year period between 1995 and 2009, the rise in import competition is associated with a reduction of the firm-specific asset lifespan by about 4.5% on average. We additionally exploit the Chinese WTO accession as an exogenous shock in firm expectations about future exposure to competition.
    Keywords: import competition; firm investment behavior; investment life-span; shorttermism
    JEL: F14 F36 F65 G32 L20 D22
    Date: 2016–10–12

This nep-bec issue is ©2016 by Vasileios Bougioukos. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.