nep-bec New Economics Papers
on Business Economics
Issue of 2017‒03‒19
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Government-Leading Welfare-Improving Collusion By Haraguchi, Junichi; Matsumura, Toshihiro
  2. The relationship between R&D intensity and profit-sharing schemes: evidence from Germany and the United Kingdom By Übelmesser, Silke; Uebelmesser, Silke
  3. State-Owned Enterprise in China: Reform, Performance, and Prospects By Gary Jefferson
  4. Misvaluation and Financial Constraints: Method of Payment and Buyer Identity in Mergers & Acquisitions By Berg, Aron
  5. Managers and Productivity Differences By Nezih Guner; Andrii Parkhomenko; Gustavo Ventura
  6. Welfare-enhancing Trade Unions in an Oligopoly with Excessive Entry By De Pinto, Marco; Goerke, Laszlo
  7. Minimum Quality Standards and Exports By Voßwinkel, Jan; Birg, Laura
  8. Optimal Privatization Policy with Asymmetry among Private Firms By Haraguchi, Junichi; Matsumura, Toshihiro
  9. Foreign Rivals are Coming to Town: Responding to the Threat of Foreign Multinational Entry By Cathy Ge Bao; Maggie X. Chen
  10. Export Orientation and Exchange Rate Changes: Do Firms React Differently and Why? By Khalid Sekkat
  11. The Internationalisation of Firms and Management Practices: A Survey of Firms in Viet Nam By Isao Kamata; Hitoshi SatoKiyoyasu Tanaka; Kiyoyasu Tanaka
  13. Environmental regulations and competitiveness: evidence based on Chinese firm data By Ankai Xu
  14. The scope for collusion under different pricing schemes By Rasch, Alexander; Gössl, Florian

  1. By: Haraguchi, Junichi; Matsumura, Toshihiro
    Abstract: We discuss government-leading welfare-improving collusion in a mixed duopoly. We formulate an infinitely repeated game in which a welfare-maximizing firm and a profit-maximizing firm coexist. The government proposes welfare-improving collusion and this is sustainable if both firms have incentives to follow it. We compare two competition structures-Cournot and Bertrand-in this long-run context. We find that Cournot competition yields greater welfare when the discount factor is sufficiently large, whereas Bertrand competition is better when the discount factor is small.
    Keywords: repeated game, public collusion, Cournot-Bertrand welfare comparison
    JEL: L13 L41
    Date: 2017–03–15
  2. By: Übelmesser, Silke; Uebelmesser, Silke
    Abstract: We study the determinants of the use of profit sharing schemes (PSS) by exploiting two datasets for Germany and the United Kingdom. Our results replicate studies for the U.S. which report a positive correlation between R&D activity and PSS use. For Germany, Granger-causality tests support a causal interpretation. Similarly to U.S.-based studies, we also find that a firm's turnover is strongly associated with PSS use whereas this does not hold for the age of a firm and its organizational characteristics.
    JEL: L20 J33 O31
    Date: 2016
  3. By: Gary Jefferson (Brandeis University)
    Abstract: State-owned enterprise reform in China has travelled a long and uneven road. Throughout, its key driver has been the introduction of competition across China’s transforming economy, both the surge of new forms of domestic ownership and the ever-expanding access to technology and business methods from abroad. By highlighting the commons/public-good character of China’s SOEs, this paper underscores the importance of a clear Coasian assignment of property rights and reduced transaction costs. The paper then reviews the three stages of the reform of China’s state sector over the past 30 years, drawing on the literature that describes the intentions, achievements, and shortcomings of China’s reform program. Finally, the paper reviews the 2015 reform Guidelines and the recent literature assessing these guidelines, including their intent to clearly distinguish between the public service and commercial mission of individual SOEs, so that state-owned firms can be more rigorously accountable to their fiduciary responsibilities. Arguably, the key issue for China’s successful SOE reform is whether successful reform of China’s state sector can be achieved at the firm level on a firm-by-firm basis or if, instead, it can only be achieved through deep institutional and political reform.
    Date: 2016–08
  4. By: Berg, Aron (Research Institute of Industrial Economics (IFN))
    Abstract: The paper studies how stock price misvaluation and financial frictions affect whether an acquisition occurs between or within industries and whether the acquirer pays in cash or stocks. I set up a model where stock market misvaluation correlates within industries and across industries and assume that managers have private information regarding their own firm and firms similar to it. The model yields predictions regarding which firm acquires which firm, and the method of payment used in transactions.
    Keywords: Mergers and acquisitions; Investments; Asymmetric information; Stock misvaluation; Financial frictions
    JEL: D82 G32 G34
    Date: 2017–03–15
  5. By: Nezih Guner; Andrii Parkhomenko; Gustavo Ventura
    Abstract: We document that for a group of high-income countries (i) mean earnings of managers tend to grow faster than for non managers over the life cycle; (ii) the earnings growth of managers relative to non managers over the life cycle is positively correlated with output per worker. We interpret this evidence through the lens of an equilibrium life-cycle, span-of-control model where managers invest in their skills. We parameterize this model with U.S. observations on managerial earnings, the size-distribution of plants and macroeconomic aggregates. We then quantify the relative importance of exogenous productivity differences, and the size-dependent distortions emphasized in the misallocation literature. Our findings indicate that such distortions are critical to generate the observed differences in the growth of relative managerial earnings across countries. Thus, observations on the relative earnings growth of managers become natural targets to discipline the level of distortions. Distortions that halve the growth of relative managerial earnings (a move from the U.S. to Italy in our data), lead to a reduction in managerial quality of 27% and to a reduction in output of about 7% – more than half of the observed gap between the U.S. and Italy. We find that crosscountry variation in distortions accounts for about 42% of the cross-country variation in output per worker gap with the U.S.
    Keywords: Managers, Management, Practices, Distortions, Size, Skill Investments, Productivity Differences
    JEL: E23 E24 J24 M11 O43 O47
    Date: 2015–12
  6. By: De Pinto, Marco; Goerke, Laszlo
    Abstract: If input markets are competitive and output per firm declines with the number of firms (business stealing effect), there will be excessive entry into a Cournot oligopoly for a homogeneous commodity. However, input markets are often imperfectly competitive and the price of labor is determined by collective bargaining. The resulting rise in wages reduces output and profits and can deter entry. We analyze under which conditions greater bargaining power by the trade union reduces entry and raises welfare. Furthermore, we show that collective bargaining loosens the linkage between business stealing and excessive entry.
    JEL: D43 J51 L13
    Date: 2016
  7. By: Voßwinkel, Jan; Birg, Laura
    Abstract: This paper studies the interaction of a minimum quality standard and exports in a vertical product differentiation model when firms sell global products. If ex ante quality of foreign firms is lower (higher) than the quality of exporting firms, a mild minimum quality standard in the home market hinders (supports) exports. The minimum quality standard increases quality in both markets. A welfare maximizing minimum quality standard is always lower under trade than under autarky. A minimum quality standard reduces profits for the exporting firm. It increases domestic welfare, but reduces welfare in the export market.
    JEL: F12 L13 L50
    Date: 2016
  8. By: Haraguchi, Junichi; Matsumura, Toshihiro
    Abstract: We revisit the relationship between the optimal privatization policy and market competition indexes such as the Hirschman--Herfindahl index, which is affected by the number of firms and asymmetry of size among these firms: the larger the number of firms (the less asymmetry among firms), the lower the market concentration index. The literature on mixed oligopolies suggests that the optimal degree of privatization is increasing with the number of private firms (and, thus, decreasing with the market competition index), assuming that all private firms are homogeneous. We investigate how the asymmetry among private firms affects the optimal degree of privatization. We propose the simplest and natural model formulation for discussing asymmetry among private firms. We find that the optimal degree of privatization is either nonmonotone or monopolistically increasing (and, thus, never monopolistically decreasing) in the asymmetry among private firms.
    Keywords: market concentration index, asymmetry of private firms, mixed oligopolies
    JEL: H44 L33 L44
    Date: 2017–03–15
  9. By: Cathy Ge Bao (University of International Business and Economics); Maggie X. Chen (George Washington University)
    Abstract: This paper quantiÖes the threat of foreign competition by exploring news of foreign multinational investment appearing in over 35,000 newspapers, business presses, magazines, newswires, and other forms of media in 200 countries. Using unique time-variant firm-specic measures of foreign multinational threat, the analysis shows that domestic firms respond to the threats by upgrading productivity, raising innovation, investment and wage rate, and altering product composition. However, the responses exhibit substantial heterogeneity across firms: within each industry, the right tail of the domestic productivity distribution responds by increasing innovation while the left tail escapes competition threats by dropping products, leading to a U-shape relationship between initial productivity and productivity growth. Actual multinational competition, in contrast, leads to product dropping only. These previously unexplored responses to the threat of foreign competition constitute an economically important source of gains from globalization and convey new implications for the timing, evolvement, and form of industrial, trade and investment policies.
    Keywords: threat, foreign investment news, and domestic Örm responses
    JEL: F1 F2 L2 D2
    Date: 2016
  10. By: Khalid Sekkat (University of Brussels and ERF)
    Abstract: This paper uses firm level data from 28 developing countries to examine the relationship between manufactured firms’ export orientation and exchange rate. The analysis incorporates the role of firm heterogeneity and country characteristics. We capture firms’ heterogeneity through the share of imported inputs, the size of the firm and labor productivity and country characteristics through the quality of domestic institutions and the degree of financial development. The data set allows constructing three sub-samples according to firms’ status on the export market (survivors, entrants and exitors). The results show important differences between survivors, entrants and exitors. Firm characteristics have little effect on survivors while many of these characteristics have significant effect on entry and on exit. Among the country characteristics of interest, only financial development has consistent effect across samples. The effect of exchange rate on exports volume is influenced by firm size and country financial development. The effect on entry is influenced by firm size and imported inputs but not by country characteristics. In contrast to entry, no firm characteristic has an impact on the effect of exchange on firm exit while financial development does on exit but not on entry. Splitting the REER into Equilibrium REER and misalignment shows that both components have effects on firm export orientation. Such effects depend only on the level of financial development but the dependence is not monotonic.
    Date: 2016–04
  11. By: Isao Kamata; Hitoshi SatoKiyoyasu Tanaka (Institute of Developing Economies Japan External Trade Organization(IDE-JETRO)); Kiyoyasu Tanaka (Institute of Developing Economies Japan External Trade Organization(IDE-JETRO))
    Abstract: This study examines the role of management practices in the internationalisation of domestic firms through directly exporting and/or supplying to local affiliates of multinationals. An original survey of manufacturing firms in Viet Nam was conducted, investigating their management practices such as human resource management and internationalisation status. The survey results shed light on similarities and dissimilarities among firms in several dimensions of management practices. Findings reveal that internationalised firms tended to be more enthusiastic about the formal training of production workers, the modernisation of production and operation, and product and process innovation. Differences in skills and experience requirements for newly employed managers were less recognisable, but internationalised firms tended to have managers who studied overseas. Furthermore, the use of public support to employee training, teamwork in production, and unionisation of employees did not show a significant difference between internationalised and non-internationalised firms.
    Keywords: Management Practices, Firm Heterogeneity, Global Value Chains
    JEL: F23 F61 M11 M50
    Date: 2017–03
  12. By: Galbreath, Jeremy
    Abstract: Employing resource-based perspectives of the firm as a theoretical foundation, this article empirically examines the relationship between women in two different types of leadership roles and environmentally sustainable firms. I study an unbalanced panel data set of 2,006 wine firms in Australia for the period 2007–2014. The results suggests that when accounting for their individual, independent effects, women in technical leadership roles are positively associated with environmental sustainability, while women in professional leadership roles are not. However, the potential complementarities of women in both roles are explored, their interactive, co-joint (complementary) effect explains significantly more variance in the environmental sustainability variable than their individual effects. The results are discussed along with limitations and directions for future research.
    Keywords: Agribusiness, Production Economics,
    Date: 2017–01
  13. By: Ankai Xu
    Abstract: This paper provides empirical evidence in support of the Porter hypothesis that tighter environmental regulations can increase productivity under certain circumstances. It builds on a theoretical model in which environmental regulations induce firms to adopt more efficient technologies. Using Chinese firm-level data covering a ten-year period, the empirical study examines the effects of two specific policy instruments - the pollution levy and regulatory standards - on firm productivity. It finds a bell-shaped relationship between pollution levies and the total factor productivity of firms, indicating that an increase in the pollution levy rate can be associated with higher productivity. In addition, the study investigates the effect of pollution emission standards on firm productivity and identifes an initial negative effect which diminishes after a period of two to three years.
    Keywords: Environmental regulations, Innovation, Productivity, Porter hypothesis, China.
    JEL: D2 F18 Q52 Q55 Q56
    Date: 2016–12–15
  14. By: Rasch, Alexander; Gössl, Florian
    Abstract: We analyze and compare the incentives to collude under different pricing schemes in a differentiated-products market where customers have elastic demand. We show that allowing firms to set two-part tariffs as opposed to linear prices facilitates collusion at maximum prices independent of the degree of differentiation. However, compared to a situation where firms can only set fixed fees that are independent of the quantity purchased, collusion at maximum prices is less sustainable with two-part tariffs. The results have important implications for competition policy where the perspective—static or dynamic—may be crucial.
    JEL: D43 L13 L41
    Date: 2016

This nep-bec issue is ©2017 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.