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on Business Economics |
| By: | Limbach, Peter; Schmid, Markus M.; Scholz-Daneshgari, Meik |
| Abstract: | We examine how CEOs' impact on firm value varies over time. We document a hump-shaped relation between CEO tenure and firm value which is subject to meaningful variation depending on industry dynamics, the business cycle, and CEOs' adaptability to changes. Semi-parametric estimations, stock returns to sudden deaths and to takeover announcements, as well as tests for extrapolation, survivor-ship, and endogenous CEO-firm matching and turnover confirm our results. They suggest that a considerable fraction of high-tenure CEOs is no longer the optimal match for their firms which seem to have difficulties, due to governance rather than labor market frictions, replacing incumbent CEOs. |
| Keywords: | CEO adaptability,(within-)CEO heterogeneity,CEO tenure,CEO term limits,environmental dynamics,firm value,investments |
| JEL: | G30 G34 J24 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1611&r=bec |
| By: | Satoh, Atsuhiro; Tanaka, Yasuhito |
| Abstract: | We examine maximin and minimax strategies for firms under symmetric oligopoly with differentiated goods. We consider two patterns of game; the Cournot game in which strategic variables of the firms are their outputs, and the Bertrand game in which strategic variables of the firms are the prices of their goods. We will show that the maximin strategy and the minimax strategy in the Cournot game, and the maximin strategy and the minimax strategy in the Bertrand game for the firms are all equivalent. However, the maximin strategy for the firms are not necessarily equivalent to their Nash equilibrium strategies in the Cournot game nor the Bertrand game. But in a special case, where the objective function of one firm is the opposite of the sum of the objective functions of other firms, the maximin and the minimax strategies for the firms constitute the Nash equilibrium both in the Cournot game and the Bertrand game. |
| Keywords: | maximin strategy, minimax strategy, oligopoly |
| JEL: | C72 D43 |
| Date: | 2016–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:75837&r=bec |
| By: | Mayer, Thierry; Melitz, Marc J.; Ottaviano, Gianmarco I. P. |
| Abstract: | We document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. In response to positive demand shocks, those French firms skew their export sales towards their best performing products; and also extend the range of products sold to that market. We develop a theoretical model of multiproduct firms and derive the specific demand and cost conditions needed to generate these product-mix reallocations. Our theoretical model highlights how the increased competition from demand shocks in export markets - and the induced product mix reallocations - induce productivity changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity are substantial - and explain an important share of aggregate productivity fluctuations for French manufacturing. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:562&r=bec |
| By: | Luca Savorelli (School of Economics and Finance, University of St Andrews); Jacob Seifert (University of Manchester) |
| Abstract: | We consider a spatial duopoly with non-monotonic network effects and extend the literature by endogenizing firms' location decisions. We show that the existence of equilibrium is ruled out due to displacement incentives at the location stage whenever network effects are sufficiently strong. Furthermore, unlike in exogenous location models, neither vertical product differentiation nor a monopoly outcome can arise endogenously in equilibrium. Relative to monotonic network effect models, our framework provides an additional rationale for a duopolistic market structure to be welfare-preferred to monopoly: for large population sizes, splitting demand between two firms can reduce the disutility from crowding. |
| Keywords: | product differentiation, network effects, welfare. |
| JEL: | L14 D62 |
| Date: | 2016–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:san:wpecon:1615&r=bec |
| By: | Shonchoy, Abu S.; Tsubota, Kenmei |
| Abstract: | Political protests in the form of strikes, locally known as hartal, remain quite common in the Indian subcontinent countries. Such a form of protests is associated with mass movement, intended to cause a total shutdown of economic activities and often results in coercion, violence, and damage to both public and private properties. Utilizing the World Bank Enterprise survey data of 2007 and 2013 of Bangladesh, this study examines the impacts of hartals on manufacturing firms. We find that political protests significantly increase costs for firms. Using flexible cost function based on factor analysis we see that the factor-neutral effect of strikes is positive and statistically significant, showing evidence of a reduction in firm productivity due to hartals. However, we did not find any evidence for systematic factor re-optimization by firms – in response to political strikes – suggesting that firms do not reallocate factor shares to tackle uncertain and irregular shocks like hartals. |
| Keywords: | Productivity, Manufacturing industries, Mass movement, Political strikes, Translog cost function, Factor biased technology |
| JEL: | D24 D74 O14 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper523&r=bec |
| By: | Ottaviano, Gianmarco I. P.; Peri, Giovanni; Wright, Greg C. |
| Abstract: | This paper explores the impact of immigrants on the imports, exports and productivity of service- producing firms in the U.K. Immigrants may substitute for imported intermediate inputs (offshore production) and they may impact the productivity of the firm as well as its export behavior. The first effect can be understood as the re-assignment of offshore productive tasks to immigrant workers. The second can be seen as a productivity or cost cutting effect due to immigration, and the third as the effect of immigrants on specific bilateral trade costs. We test the predictions of our model using differences in immigrant inflows across U.K. labor markets, instrumented with an enclave-based instrument that distinguishes between aggregate and bilateral immigration, as well as immigrant diversity. We find that immigrants increase overall productivity in service-producing firms, revealing a cost cutting impact on these firms. Immigrants also reduce the extent of country-specific offshoring, consistent with a reallocation of tasks and, finally, they increase country-specific exports, implying an important role in reducing communication and trade costs for services. |
| Keywords: | Immigration,Services Trade |
| JEL: | F16 F10 F22 F23 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:560&r=bec |
| By: | Gidehag, Anton (Örebro University and HUI Research); Lodefalk, Magnus (The Ratio Institute) |
| Abstract: | We examine the link between new employees in leading positions and subsequent productivity in small- and medium-sized (SME) enterprises. Managers and professionals are likely to possess important tacit knowledge. They are also in a position to influence the employing firm. Exploiting rich and comprehensive panel data for Sweden in the 2001-2010 period and employing semi-parametric and quasi-experimental estimation techniques, we find that newly recruited leading personnel have a positive and statistically significant impact on the productivity of the hiring SME. Interestingly, our results suggest that professionals with experience from international firms and enterprise groups contribute the most to total factor productivity. Overall, the findings suggest the importance of mobility of leading personnel for productivity-enhancing knowledge spillovers to SMEs. |
| Keywords: | recruitment; knowledge spillovers; firm growth; productivity; SME |
| JEL: | D22 D24 D83 J24 J62 |
| Date: | 2016–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0280&r=bec |
| By: | Annette Schminke (KU Leuven); Johannes Van Biesebroeck (KU Leuven and CEPR) |
| Abstract: | For small open economies, it is essential that many firms find their way to the export market and most governments provide some form of export promotion assistance. We use detailed firm-level data for Flanders, the largest region in Belgium, to evaluate whether its program raises firms' propensity to start exporting outside the EU single market. We find robust evidence for such an effect by relying on the selection-on-observables assumption which we implement using various estimators. Results remain positive and statistically signifcant, but are smaller in size, when we use two strategies to mitigate self-selection concerns: (i) focus on sub-samples of firms where endogenous selection into treatment is less likely, and (ii) use firms that receive the weakest form of support as controls for firms receiving more extensive support. |
| Keywords: | International trade, trade policy, export market entry |
| JEL: | F13 F14 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201612-316&r=bec |
| By: | Hatzigeorgiou, Andreas (Ratio); Karpaty, Patrik (Örebro University School of Business); Kneller, Richard (University of Nottingham); Lodefalk, Magnus (Örebro University School of Business) |
| Abstract: | Offshoring is an important aspect of firms’ internationalization. However, offshoring comes at a cost, especially where information or trust is lacking. Immigrant employees could reduce such offshoring costs through their knowledge of their former home countries and via access to foreign networks. We develop a framework of heterogeneous final-good firms to guide our empirical analysis and draw on new employer-employee data for approximately 12,000 Swedish firms during the time period 1998-2007. Our results support the hypothesis that immigrant employees spur offshoring activities by firms through lower offshoring costs. Hiring one additional foreign-born worker can increase offshoring up to three percent on average, with skilled migrants having the strongest effects. |
| Keywords: | offshoring; migration; networks; trust; information; trade barriers |
| JEL: | D21 D83 F14 F22 F23 |
| Date: | 2016–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2016_007&r=bec |
| By: | Crowley, M.; Song, H.; Meng, N. |
| Abstract: | We estimate how a rise in uncertainty about future tariff rates impacts firm decisions to enter into and exit from export markets. Using Chinese customs transactions between 2000-2009, we exploit time-variation in product-level trade policy and find that Chinese firms are less likely to enter new foreign markets and more likely to exit from established foreign markets when their products are subject to increased trade policy uncertainty. Our analysis is based on the phenomenon of “tariff echoing" - after a tariff hike in one country, another country is likely to raise its tariff on the same product. Overall, we find that if there had been no trade policy uncertainty created by the use of contingent tariffs, Chinese entry into foreign markets would have been roughly 2 percent higher per year. We use our model to counterfactually estimate how much entry by Chinese firms over 2001-2009 was due to future trade policy certainty provided by membership in the WTO. |
| Keywords: | Trade policy uncertainty, trade agreements, China shock, Chinese exporters, antidumping, information spillovers |
| JEL: | F12 F13 F14 |
| Date: | 2016–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1676&r=bec |
| By: | Krenz, Astrid |
| Abstract: | This paper uses a comprehensive, official firm-level dataset for German manufacturing firms to investigate the location decision of new firm activity in the German regional economy, differentiated by firm structure. The rich regional dimension of this dataset is investigated for the first time in regard to the location choices of firms. Results reveal that agglomeration economies play a significant role for small firms, but not for medium-sized and large firms. Whereas the market potential exerts a significant positive impact for all firms, labor costs do not exert a significant impact on large firms' location decisions. |
| Keywords: | Firm location,Regional economy,Agglomeration economies |
| JEL: | R11 R12 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:298&r=bec |