nep-bec New Economics Papers
on Business Economics
Issue of 2017‒02‒05
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Hires and Separations in Equilibrium By Edward P. Lazear; Kristin McCue
  2. The diffusion of knowledge via managers’ mobility By Giordano Mion; Luca David Opromolla; Alessandro Sforza
  3. Are Smaller (Larger) Corporate Headquarters Better? By MIYAJIMA Hideaki; OGAWA Ryo; USHIJIMA Tatsuo
  4. The great trade collapse and the Spanish export miracle: Firm-level evidence from the crisis By Eppinger, Peter S.; Meythaler, Nicole; Sindlinger, Marc-Manuel; Smolka, Marcel
  5. Distorted monopolistic competition By Behrens, Kristian; Mion, Giordano; Murata, Yasusada; Suedekum, Jens
  6. Improving rural business development, one firm at a time: A look at the effects of the USDA’s Value-Added Producer Grant on firm survival By Stevenson, Marcie; Artz, Georgeanne
  7. Input price discrimination, two-part tariff contracts and bargaining By Ioannis Pinopoulos
  8. The effect of institutional ownership on firm innovation: Evidence from Chinese listed firms By Rong, Zhao; Wu, Xiaokai; Boeing, Philipp
  9. Does Innovation Mediate Good Firm Performance? By Llanto, Gilberto M.; del Prado, Fatima Lourdes E.
  10. Multiproduct firms, firm dynamics, and the productive mix of Brazilian manufacturing firms By Juliana Dias Alves; Mauro Sayar Ferreira
  11. The ZEW ICT survey 2002 to 2015: Measuring the digital transformation in German firms By Bertschek, Irene; Ohnemus, Jörg; Viete, Steffen
  12. Ownership Dynamics and Firm Performance in an Emerging Economy: A Meta-Analysis of the Russian Literature By Ichiro Iwasaki; Satoshi Mizobata; Alexander A. Muravyev
  13. Growing like Spain: 1995-2007 By Manuel García-Santana; Enrique Moral-Benito; Josep Pijoan-Mas; Roberto Ramos
  14. The Effects of Japanese Customer Firms' Overseas Outsourcing on Supplier Firms' Performance By INUI Tomohiko; KODAMA Naomi

  1. By: Edward P. Lazear; Kristin McCue
    Abstract: Hiring is positively correlated with separation, both across firms and over time. A theory of hiring and separation based on shifts in demand implies the opposite. One firm or industry hires and grows when another fires and contracts. But hiring for expansion and layoff for contraction comprises the minority of hiring and separation. A more accurate view is that hiring and separation reflect churn and are balanced in equilibrium, where one is the mirror image of the other. Hiring occurs primarily to fill vacant slots that open up when a firm separates a worker. Equivalently, a separation results when a worker is hired away by another firm. A model of efficient mobility yields several specific predictions in addition to the positive correlation between hires and separations. Labor market churn is most likely in firms and industries with low mean wages and high wage variance. Additionally, churn decreases during recessions with hires falling first followed by a decline in separations to match hiring. Finally, the young are predicted to bear the brunt of hiring declines. These predictions are borne out in the LEHD microdata at the economy and firm levels.
    JEL: E24 J01 M0 M00 M5
    Date: 2017–01
  2. By: Giordano Mion; Luca David Opromolla; Alessandro Sforza
    Abstract: Better managers and managerial practices lead to better firm performance. Yet, little is known about what happens when managers move across firms. Does a firm hiring a good manager improve its performance? If yes is there some valuable knowledge the manager has acquired and successfully diffused to the new firm? In order to answer these questions, we use information related to specific activities the manager was involved in when working for previous firms. More specifically, we use information on whether the manager has worked in the past for firms exporting to a specific destination country or a specific product. Our data is rich enough to allow controlling for both manager and firm unobservables and wash out any time-invariant ability of the manager as well as overall firm performance. We find that the export experience gained by managers in previous firms leads their current firm towards higher export performance, and commands a sizable wage premium for the manager. We use several strategies to deal with endogeneity including an exogenous event study: the sudden end of the Angolan civil war in 2002. We further refine our analysis by looking at different types of managers (general, production, financial and sales) and show how specific export experience interacts with the degree of product differentiation and/or the financial vulnerability of a firm’s products as well as with rising import competition from China.
    Keywords: managers; knowledge diffusion; firm performance; job mobility; export experience
    JEL: F16 J31 L2 M2
    Date: 2016–12
  3. By: MIYAJIMA Hideaki; OGAWA Ryo; USHIJIMA Tatsuo
    Abstract: This paper investigates the size and performance effect of corporate headquarters for a large sample of Japanese firms. We find that the size of headquarters is systematically associated with firm attributes such as scale, industrial scope, and research and development (R&D) and advertising intensities. We also observe that better governed firms have larger headquarters in contrast to the view that corporate headquarters are apt to be overstaffed due to agency problems. Our analysis of firm value suggests that enlarging headquarters involves a cost that is particularly great for diversified firms. Specifically, as headquarters grow in size, the efficiency of inter-business fund flow declines. This novel finding suggests that downsizing headquarters can improve firm performance by increasing allocative efficiency.
    Date: 2017–01
  4. By: Eppinger, Peter S.; Meythaler, Nicole; Sindlinger, Marc-Manuel; Smolka, Marcel
    Abstract: We provide novel evidence on the micro-structure of international trade during the 2008 financial crisis and subsequent global recession by exploring a rich firm-level data set from Spain. The focus of our analysis is on changes at the extensive and intensive firm-level margins of trade, as well as on performance differences (jobs, productivity, and firm survival) across firms that differ in their export status. We find no adverse effects of the financial crisis on foreign market entry or exit, but a considerable increase in the export intensity of firms after the financial crisis. Moreover, we find that exporters were more resilient to the crisis than non-exporters. Finally, while exporters showed a significantly more favorable development of total factor productivity after 2009 than non-exporters, aggregate productivity declined substantially in a large number of industries in Spanish manufacturing. We also briefly explore two factors that might help explain the surprisingly strong export performance of Spain in the aftermath of the great trade collapse: improved aggregate competitiveness due to internal and external devaluation and a substitutive relationship between domestic and foreign sales at the firm level.
    Keywords: international trade,financial crisis,Spain,manufacturing,firm-level data
    JEL: F10 F14 G01 D24
    Date: 2016
  5. By: Behrens, Kristian; Mion, Giordano; Murata, Yasusada; Suedekum, Jens
    Abstract: We characterize the equilibrium and optimal resource allocations in a general equilibrium model of monopolistic competition with multiple asymmetric sectors and heterogeneous firms. We first derive general results for additively separable preferences and general productivity distributions, and then analyze specific examples that allow for closed-form solutions and a simple quantification procedure. Using data for France and the United Kingdom, we find that the aggregate welfare distortion — due to inefficient labor allocation and firm entry between sectors and inefficient selection and output within sectors — is equivalent to the contribution of 6–8% of the total labor input.
    Keywords: monopolistic competition,welfare distortion,intersectoral distortions,intrasectoral distortions
    JEL: D43 D50 L13
    Date: 2016
  6. By: Stevenson, Marcie; Artz, Georgeanne
    Abstract: Economic studies of firm survival suggest that capital acquisition and asset fixity are some of the biggest challenges facing start-up firms today, especially in rural areas. The Value-Added Producer Grant (VAPG) program was established by USDA’s Rural Business-Cooperative Service in 2001 to help independent producers and similar organizations develop value-added agricultural businesses, many of which are located in rural areas. Utilizing information on Value-Added Producer Grant recipients from 2001 to 2011 in Iowa and North Carolina coupled with National Establishment Time-Series data from 1990 to 2011, we use survival analysis to estimate the effects of a VAPG on firm survival. Recipients are matched with firms in the same industry and state, starting in the same year, who did not receive VAPG funding to estimate the effect of the grant on firm survival. Preliminary results suggest that, after controlling for other characteristics than affect firms survival, receiving a VAPG had a positive and significant impact on firm survival length. For start-up firms, preliminary estimates suggest that survival times are nearly doubled. For more established firms (those that were in business at least three years before receiving a grant), the effects are larger, with survival times increasing 6 times for recipient firms.
    Keywords: Agribusiness, Community/Rural/Urban Development,
    Date: 2017–01
  7. By: Ioannis Pinopoulos (Department of Economics, University of Macedonia)
    Abstract: We consider an upstream supplier who bargains with two cost-asymmetric downstream firms over the terms of interim observable two-part tariff contracts: contracts are initially secret (acceptance decisions are based on beliefs) but downstream firms observe the accepted contract terms before competing in prices. We show that the more efficient downstream firm pays a higher input price than its less efficient rival, a finding that is in stark contrast to the previous findings in the literature on input price discrimination with two-part tariff contracts. We also show that a ban on input price discrimination will reduce both consumer and total welfare when the upstream supplier bargains the common two-part tariff contract with the less efficient firm. This result is interesting from a policy perspective since it implies that even though under discriminatory input prices the upstream supplier favors the “wrong” firm, non-discriminatory input pricing can make things even worse in terms of welfare.
    Keywords: Vertical relations, input price discrimination, two-part tariffs, bargaining, welfare.
    JEL: D4 L1 L4
    Date: 2017–01
  8. By: Rong, Zhao; Wu, Xiaokai; Boeing, Philipp
    Abstract: Monitoring by institutional investors can act as an important mechanism to promote firm innovation. By investigating Chinese listed firms' patenting between 2002 and 2011, we find that the presence of institutional investors enhances firm innovation. Consistent with the monitoring view, we further find that (1) the effect of institutional investors on firm patenting mainly comes from mutual funds; (2) the effect is more pronounced when market competition is more intense; (3) the effect exists among private- and minor state-owned enterprises, but not among major state-owned enterprises. The above findings are robust when innovation quality is examined.
    Keywords: Institutional investor,Firm innovation,Patenting,Mutual funds,China
    JEL: G20 G32 O31 O32 O33
    Date: 2017
  9. By: Llanto, Gilberto M.; del Prado, Fatima Lourdes E.
    Abstract: Aside from physical capital and human resource, private firms are also advised to invest in innovations to be more productive and profitable. However, it is important to ensure such investment is well-spent. This study found that product and process innovations do lead to increase in sales and profits, and improve labor productivity. It also showed that firm size, age, and foreign equity are important factors leading firms to innovate.
    Keywords: Philippines, innovation, small and medium enterprises, process innovation, firm performance, product innovation, SMEs
    Date: 2016
  10. By: Juliana Dias Alves (Cedeplar-UFMG); Mauro Sayar Ferreira (Cedeplar-UFMG)
    Abstract: This is a pioneer study on the Brazilian manufacturing sector focused on: i) the role and characteristics of multi-product (MP) plants; and ii) on the determinants and impact of product switching within firms. MP corresponds to 37% of the manufacturing firms, but generates 81% of the output. They employ more workers, are more likely to be exporters, have higher labor productivity and higher TFP. The extensive margin due to adding and retirement of products contributes more to output growth than entry and exit of firms. Among continuing firms, half of the annual output growth (from 2005 to 2009) was originated in firms that switched products. Firms that have net added (dropped) items had higher (smaller) increase in output, in employers, and in the TFP. Higher TFP, more employers, or being exporter increased the probability to only add or only drop items in the future.
    Keywords: Multiproduct, scope, total factor productivity, heterogeneous firms
    JEL: D2 F23 L1 L16 L6
    Date: 2016–06
  11. By: Bertschek, Irene; Ohnemus, Jörg; Viete, Steffen
    Abstract: Modern Information and Communication Technologies (ICT) have been proliferating through the entire business sector over recent decades. This increasing digitalization is having a substantial impact on economic activity and is continuously changing the nature of production processes and our day-to-day working life. Since 2002, the ICT Survey carried out by the Centre for European Economic Research (ZEW) has tracked the diffusion and use of ICT in different industries within the German economy. Further surveys were conducted at irregular intervals in 2004, 2007, 2010 and 2015. The survey was designed by ZEW's Research Department Information and Communication Technologies. The data was collected via computer-assisted telephone interviews (CATI) by infas Institute for Applied Social Sciences. The central aim of the survey is twofold: Firstly, a representative picture of the use of ICT by German firms is obtained. Secondly, taking account of a large set of further firm characteristics it should allow an analysis of the consequences of employing ICT and ICT-related projects with respect to different measures of firm performance.
    Date: 2017
  12. By: Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University); Satoshi Mizobata (Institute of Economic Research, Kyoto University); Alexander A. Muravyev (Department of Economics, Higher School of Economics in St. Petersburg, Russia Institute of Labor Economics (IZA))
    Abstract: This paper provides a meta-analysis of studies on the effect of ownership on the performance of Russian firms over 20 years of rapid institutional and economic changes. We review 29 studies extracted from the EconLit and Web of Science databases with a total of 877 relevant estimates. We find that the government negatively affects company management regardless of its administrative level. In contrast, private ownership is positively associated with firm performance. The effect size and statistical significance are notably varied among different types of private ownership. While the effect of insider (employee and management) ownership is comparable to that of foreign investors, the effect of domestic outsider investors is considerably smaller. Our assessment of publication selection bias reveals that the existing literature does not contain genuine evidence for a series of ownership types and, therefore, some of the findings have certain limitations.
    Keywords: Privatization, Corporate Ownership, Firm Performance, Meta-analysis, Publication Selection Bias, Russia
    Date: 2017–01
  13. By: Manuel García-Santana (Universitat Pompeu Fabra); Enrique Moral-Benito (Banco de España); Josep Pijoan-Mas (CEMFI); Roberto Ramos (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: Spanish GDP grew at an average rate of 3.5% per year during the expansion of 1995-2007, well above the EU average of 2.2%. However, this growth was based on factor accumulation rather than productivity gains as TFP fell at an annual rate of 0.7%. Using firm-level administrative data for all sectors we show that deterioration in the allocative efficiency of productive factors across rms was at the root of the low TFP growth in Spain, while misallocation across sectors played only a minor role. Cross-industry variation reveals that the increase in misallocation was more severe in sectors where government infl uence is more important for business success, which represents novel evidence on the potential macroeconomic costs of crony capitalism. In contrast, sectoral di erences in nancial dependence, skill intensity, innovative content, tradability, or capital structures intensity appear to be unrelated to changes in allocative eciency. All in all, the observed high output growth together with increasing firm-level misallocation in all sectors is consistent with an expansion driven by a demand boom rather than by structural reforms.
    Keywords: TFP, misallocation, Spain.
    JEL: D24 O11 O47
    Date: 2016–03
  14. By: INUI Tomohiko; KODAMA Naomi
    Abstract: We examine the effects of globalization on firm performance through buyer-seller networks. In particular, we focus on the impact of the start of customer firms' overseas outsourcing on supplier firms' productivity, markups, employment, average wage, and sales. Previous literature examines the direct effect of import activities on firm productivity, but there has been only limited research looking at the effect of import activities through buyer-seller networks. This paper analyzes the effects of changes in customers' import status on supplier firms' performance. We combine propensity score matching with difference-in-differences (DID) estimation, comparing the performance of manufacturing firms whose major customers begin importing with those whose customers continue to procure intermediate inputs within Japan. Our results indicate that the impact of a customer's commencement of importing on suppliers' markups, productivity, and sales is negative but with no significant effects on wage and employment. These results imply that an increase in import activities of customer firms has procompetitive effects on domestic suppliers and leads to a decrease in their markups and productivity.
    Date: 2016–12

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