nep-bec New Economics Papers
on Business Economics
Issue of 2017‒01‒08
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Quality of Regional Government and Firm Performance. By Fernanda Ricotta
  2. Learning, Confidence, and Business Cycles By Cosmin L. Ilut; Hikaru Saijo
  3. Interfirm Relationships and Business Performance By Jing Cai; Adam Szeidl
  4. Sectorial and regional determinants of firm dynamics in developing countries: evidence for low, medium and high tech manufacturing in Argentina By Calá, Carla Daniela
  5. The Effect of Innovation on Productivity: Evidence from Turkish Manufacturing Firms By Fazlıoğlu, Burcu; Dalgıç, Başak; Yereli, Ahmet Burçin
  6. Initial aspirations, size, and being a limited-liability company cause growth among startups By Kotiranta, Annu; Pajarinen, Mika; Rouvinen, Petri
  7. The impacts of the EU ETS on efficiency: An empirical analyses for German manufacturing firms By Löschel, Andreas; Lutz, Benjamin Johannes; Managi, Shunsuke
  8. As Seen on TV: Price Discrimination and Competition in Television Advertising By Gil, Ricard; Riera-Crichton, Daniel; Ruzzier, Christian
  9. Large Scope Business Sector Reforms: Has the Swedish Business Sector Become More Entrepreneurial than the U.S. Business Sector? By Andersson, Fredrik; Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars

  1. By: Fernanda Ricotta
    Abstract: The performance of a firm is influenced by decisions made by the firm itself as well as factors external to it. Firm competencies are important but also competencies that pertain to territories. External factors encompass different aspects of the environmental context in which firms operate, such as physical infrastructures, innovative capacity and efficiency of the public administration. The attention in this paper is on the effect of regional quality of government (QoG) on the Total Factor Productivity (TFP) of firms. The analysis is based on comparable cross-country data of manufacturing firms operating in the seven European countries (Austria, France, Germany, Hungary, Italy, Spain and the United Kingdom) included in the ?European Firms in a Global Economy: internal policies for external competitiveness? (EFIGE) project. The measure of the ?quality of government? is the European quality of government index (EQI), calculated at regional level over twenty-seven EU members. Scholars have demonstrated that the institutional environment affects macro variables such as growth, income level, productivity, innovation activity, investment and trade at the country (Aron 2000; Acemoglu, Johnson and Robinson, 2001; Hall and Jones, 1999; Barbarosa and Faria 2011; Levchenko 2007) as well as at the regional level (Tabellini 2010; Rodríguez-Pose and Di Cataldo 2014; Ketterer and Rodríguez-Pose 2014). The quality of institutions also influences micro variables such as firm performance (Dollar, Hallward-Driemeier, and Mengistae, 2005; Lasagni, Nifo and Vecchione, 2015; Aiello, Pupo and Ricotta, 2014; Manzocchi, Quintieri and Santoni, 2014). Recent studies indicate that there might be a significant difference in the macro- and micro-impacts of institutional quality: better institutional quality that may have beneficial macro-implications, may not necessarily have positive implications for firm performance (Bhaumik and Dimova 2014). Thus, the proper level of analysis to test whether the regional institutional environment affects productivity is to focus on firms (Beugelsdijk 2007). To disentangle internal from external productivity drivers, the multilevel approach is employed. In the econometric specification, the 2008-value of TFP depends on key-drivers of firm performance (size, family-management, group membership, innovations and human capital), on the variable of interest, the indicator of the quality of government, and on control variables at the regional level that, according to the theoretical and empirical literature, may affect firms? economic performance. Results refer to 2008 and show, as expected, the importance of firm-specific determinants of TFP. Results confirm that to be located in a region with high level of R&D and good infrastructure is correlated positively to the firm?s TFP. As far as the specific scope of this paper is concerned, the quality of regional government has a positive impact on firm TFP. This is in line with previous research which underlines the importance of the quality of institutions at the regional level while it contradicts the hypothesis that within country institutional differences do not matter for economic performance (Gennaioli et al, 2013). As far as the EQI components are concerned, corruption and the quality of services appear to be positively correlated to TFP, while the evidence is inconclusive for the impartiality indicator.
    Keywords: Institutions; firm performance; European regions; multilevel model
    JEL: O43 D24 C30
    Date: 2016–12
  2. By: Cosmin L. Ilut; Hikaru Saijo
    Abstract: We build a tractable heterogeneous-firm business cycle model where firms face Knightian uncertainty about their profitability and learn it through production. The cross-sectional mean of firm-level uncertainty is high in recessions because firms invest and hire less. The higher uncertainty reduces agents' confidence and further discourages economic activity. We characterize this feedback mechanism in linear, workhorse macroeconomic models and find that it endogenously generates empirically desirable cross-equation restrictions such as: amplified and hump-shaped dynamics, co-movement driven by demand shocks and countercyclical correlated wedges in the equilibrium conditions for labor, risk-free and risky assets. In a rich model estimated on US macroeconomic and financial data, the information friction changes inference and significantly reduces the empirical need for standard real and nominal rigidities. Furthermore, endogenous idiosyncratic uncertainty propagates shocks to financial conditions, disciplined by observed spreads, as key drivers of fluctuations, and magnifies the aggregate activity's response to monetary and fiscal policies.
    JEL: C11 D81 E32 E44
    Date: 2016–12
  3. By: Jing Cai; Adam Szeidl
    Abstract: We organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on firm performance. We randomized 2,800 firms into small groups whose managers held monthly meetings for one year, and into a “no- meetings” control group. We find that: (1) The meetings increased firm revenue by 8.1 percent, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score; (2) These effects persisted one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (4) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (5) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching. (6) Firms whose managers discussed management, partners, or finance improved more in the associated domain, suggesting that the content of conversations shaped the nature of gains.
    JEL: D22 L14 O12 O14
    Date: 2016–12
  4. By: Calá, Carla Daniela
    Abstract: We analyse the determinants of firm dynamics in developing countries using Argentina as an illustrative case. We explain firm entry and exit at the regional level, distinguishing three groups of manufacturing activities: low, medium and high tech. We find that both region -and sector- specific determinants explain firm dynamics, but the impact is not homogeneous across sectors. In particular, for low tech industries, there is a need for explanatory variables that proxy for the specificities of developing economies (poverty, informal economy and idle capacity). We also find evidence of a core-periphery pattern according to which agglomeration economies and previous entries/exits have different effects in core and peripheral regions. These results are relevant for policy makers in developing countries, who should take into account not only the specificities of such economies, but also the regional heterogeneity both in terms of the level of development and industrial composition within the country.
    Keywords: Dinámica Empresarial; Creación de Empresas; Cese de Actividad; Relación Centro-Periferia; Modelo de Panel; Argentina;
    Date: 2018
  5. By: Fazlıoğlu, Burcu; Dalgıç, Başak; Yereli, Ahmet Burçin
    Abstract: This paper explores the effects of firms’ innovation activities on their productivity changes systematically for Turkish manufacturing firms differentiating between different typologies of innovation. To do so, we utilize a recent and comprehensive firm level dataset over the period 2003-2014, mainly constructed on the four consecutive waves of the “Community Innovation Surveys”. We employ endogenous switching methodology controlling for endogeneity and selection bias issues as well as analyzing counterfactual scenarios. The main finding of the study points to firm heterogeneity in terms of both propensity to innovate and their benefiting from innovation activities. Our results indicate that all types of innovation activity have positive effects on the productivity of firms with respect to non-innovating firms. Further, we find robust evidence for the differential impact of innovation on firm productivity across different innovation types.
    Keywords: Internal and External R&D, Product and Process Innovation, Organizational and Marketing Innovation, Firm Productivity
    JEL: D22 L25 O30
    Date: 2016–12–23
  6. By: Kotiranta, Annu; Pajarinen, Mika; Rouvinen, Petri
    Abstract: In this report, we study the development of Finnish startup firms based on both survey and register data. The sample includes all firms that were founded in the first half of the year 2005, and those firms have been monitored for eight years. We find that entrepreneurs in growth-oriented startups have had typically already some experience from being an entrepreneur or managing business, and have had success in risk-taking activities. Growth-oriented startup firms are in turn more likely to be networked with other firms and institutions, and are already in the startup phase larger than others. Growth-orientation correlates significantly with ex-post growth, but does not boost failure rates. Besides growth-orientation, the larger size of the firm in the startup phase and the limited liability company form correlate significantly positively with ex-post growth.
    Keywords: Entrepreneurship, growth firm, start-up, enterprise policy
    JEL: D92 L26 L53 M13
    Date: 2016–12–22
  7. By: Löschel, Andreas; Lutz, Benjamin Johannes; Managi, Shunsuke
    Abstract: We investigate the effect of the European Union Emissions Trading System (EU ETS) on the economic performance of manufacturing firms in Germany. Our difference-in-differences framework relies on several parametric conditioning strategies and nearest neighbor matching. As a measure of economic performance, we use the firm specific distance to the stochastic production frontier recovered from official German production census data. None of our identification strategies provide evidence for a statistically significant negative effect of emissions trading on economic performance. On the contrary, the results of the nearest neighbor matching suggest that the EU ETS rather had a positive impact on the economic performance of the regulated firms, especially during the first compliance period. A subsample analysis confirms that EU ETS increased the efficiency of treated firms in at least some two-digit industries.
    Keywords: Control of Externalities,Emissions Trading,Economic Performance,Manufacturing,Difference-in-Differences,Nearest Neighbor Matching,Stochastic Production Frontier
    JEL: Q52 D22 Q38 Q48
    Date: 2016
  8. By: Gil, Ricard; Riera-Crichton, Daniel; Ruzzier, Christian
    Abstract: In this paper we examine the empirical relationship between price discrimination and competition in television advertising. While most empirical papers on the topic document a positive relationship, we find that price discrimination is negatively related to competition (as measured by the number of competing firms), a result that is consistent with conventional wisdom. Our results also show that only incumbent stations (unlike entrants) respond by engaging less in price discrimination when faced with a more competitive environment. Our evidence suggests that incumbents may use price discrimination as a strategic tool to accommodate entry - a strategy that has received scant attention in the existing entry literature.
    Keywords: competition, price discrimination, Spanish television
    JEL: D22 D43 L11 L82
    Date: 2016–12–21
  9. By: Andersson, Fredrik (Research Institute of Industrial Economics (IFN)); Heyman, Fredrik (Research Institute of Industrial Economics (IFN)); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: Recent studies document a 30-year decline in various measures of entrepreneurship in the United States. In contrast, using detailed Swedish employer-employee data over the period 1990–2013, we find no decline in Swedish entrepreneurial activity. Aggregate net job creation is greatest among the youngest firms in the Swedish business sector. Moreover, most of the net job creation by young firms takes place in the expanding service sector. We argue that a key explanation for the high entrepreneurial activity in the Swedish business sector during the last two decades stems from economic reforms in the 1990s that mitigated several hurdles to entrepreneurship.
    Keywords: Entrepreneurship; Job dynamics; Matched employer-employee data; Industrial structure and structural change
    JEL: J23 K23 L26 L51
    Date: 2016–12–21

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