nep-bec New Economics Papers
on Business Economics
Issue of 2017‒04‒02
nine papers chosen by
Vasileios Bougioukos
Bangor University

  2. Does high-involvement management improve productivity? By Böckerman, Petri; Kangasniemi, Mari; Kauhanen, Antti
  3. Product versus Process: Innovation Strategies of Multi-Product Firms By Flach, Lisandra; Irlacher, Michael
  4. Import Competition from and Offshoring to Low-Income Countries: Implications for Employment and Wages at U.S. Domestic Manufacturers By Fariha Kamal; Mary E. Lovely
  5. Regulatory Holidays and Optimal Network Expansion By Willems, Bert; Zwart, Gijsbert
  6. Firm Growth Dynamics and Financial Constraints: Evidence from Serbian Firms By Milos Markovic; Michael Stemmer
  7. Shades of Grey: Business Compliance with Fiscal and Labour Regulations By Katherine Cuff; Steeve Mongrain; Joanne Roberts
  8. When Harry Fired Sally: The Double Standard in Punishing Misconduct By Mark L. Egan; Gregor Matvos; Amit Seru
  9. Identifying Heterogeneity in the Production Components of Globally Engaged Business Enterprises in the United States By James Fetzer; Erich Strassner

  1. By: Xiaoyang Li; Yue Maggie Zhou
    Abstract: We examine the role of firm strategy in the global combat against pollution. We find that U.S. plants release less toxic emissions when their parent firm imports more from low-wage countries (LWCs). Consistent with the Pollution Haven Hypothesis, goods imported by U.S. firms from LWCs are in more pollution-intensive industries; U.S. plants shift production to less pollution-intensive industries, produce less waste, and spend less on pollution abatement when their parent imports more from LWCs. The negative impact of LWC imports on emissions is stronger for U.S. plants located in counties with greater institutional pressure for environmental performance, but weaker for more-capable U.S. plants and firms. These results highlight the role of local institutions and firm capability in explaining firms’ choice of offshoring and environmental strategy.
    Keywords: environmental strategy, pollution haven, offshoring, institutional arbitrage, supply chain sustainability
    Date: 2016–01
  2. By: Böckerman, Petri; Kangasniemi, Mari; Kauhanen, Antti
    Abstract: There is a positive correlation between the use of high-involvement management practices and firm productivity. However, this correlation does not mean that adoption of such practices would improve productivity. The positive correlation is mostly due to more productive firms adopting high-involvement management practices.
    Date: 2017–03–27
  3. By: Flach, Lisandra; Irlacher, Michael
    Abstract: We investigate the effects of better access to foreign markets on innovation strategies of multi-product firms in industries with different scope for product differentiation. Industry-specific demand and cost linkages induce a distinction between the returns to innovation. In differentiated industries, cannibalization is lower and firms invest more in product innovation. In homogeneous industries, firms internalize intra-firm spillovers and invest more in process innovation. Using firm-level data and large exchange rate devaluations, we show that better access to foreign markets increases the incentive to innovate. However, we exploit differential effects across industries and show that the innovation strategies depend on the scope of differentiation.
    Keywords: Cannibalization Effect; innovation; Market Size Effect.; multi-product firms; product differentiation; Spillovers
    JEL: F12 F14 L25
    Date: 2017–03
  4. By: Fariha Kamal; Mary E. Lovely
    Abstract: Using confidential linked firm-level trade transactions and census data between 1997 and 2012, we provide new evidence on how American firms without foreign affiliates adjust employment and wages as they adapt to import competition from low-income countries. We provide stylized facts on the input sourcing strategies of these domestic firms, contrasting them with multinationals operating in the same industry. We then investigate how changes in firm input purchases from low-income countries as well as domestic market import penetration from these sources are correlated with changes in employment and wages at surviving domestic firms. Greater offshoring by domestic firms from low-income countries correlates with larger declines in manufacturing employment and in the average production workers’ wage. Given the negative association, however, the estimated magnitudes are small, even for a narrow measure of offshoring that includes only intermediate goods. Import penetration of U.S. markets from these sources is associated with relatively larger changes in employment for arm’s length importing firms, but has no significant correlation with employment changes at firms that do not trade. Given differences in the degree of both offshoring and import penetration, we find substantial variation across industries in the magnitude of changes associated with low-income country imports.
    Keywords: import competition, offshoring, U.S. manufacturing, employment, wages
    JEL: F14 F16 F66 L25 L60 J31
    Date: 2017–01
  5. By: Willems, Bert (Tilburg University, TILEC); Zwart, Gijsbert (Tilburg University, TILEC)
    Abstract: We model the optimal regulation of continuous, irreversible, capacity expansion, in a model in which the regulated network firm has private information about its capacity costs, investments need to be financed out of the firm's cash flows from selling network access and demand is stochastic. If asymmetric information is large, the optimal mechanism consists of a regulatory holiday for low-cost firms, and a mark-up regime for higher-cost firms. With the regulatory holiday, a firm receives the full revenue of capacity sales, and expands capacity as if it were an unregulated monopolist. Under the mark-up regime, a firm receives only a fraction of the capacity revenues, and is obliged to expand capacity whenever the price for capacity reaches a threshold. The regulatory holiday is necessary to fund information rents to the most efficient firms, which invest relatively early, as direct investment subsidies are not feasible.
    Keywords: egulatory holiday; real option value; asymmetric information; optimal contract
    Date: 2016
  6. By: Milos Markovic (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Michael Stemmer (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Using a unique dataset of unlisted Serbian firms during the period between 2005 and 2012, we analyze the impact of internal financial constraints on firm growth with respect to several firm-level characteristics. We also assess potential effects created by the 2008-2009 Global Financial Crisis. To do so, we rely on panel data models, which estimate via GMM cash flow sensitivities of firm growth, following the dynamic specification of Guariglia et al. (2011). Controlling for investment opportunities, our results show that Serbian firms face high financial constraints and exhibit generally a high reliance on retained earnings for firm growth. We do not find evidence for a crisis effect, potentially due to ex ante accumulated internal funds. Conventional firm characteristics such as age, size or overall performance largely determine the dependency on cash for firm growth. Moreover, foreign-owned companies seem to escape the financing gap by tapping other resources. A comparison with Belgian firms contrasts our results with an advanced country setting.
    Keywords: Financial constraints,firm growth,transition countries,dynamic panel data,GMM
    Date: 2017–02
  7. By: Katherine Cuff (McMaster University); Steeve Mongrain (Simon Fraser University); Joanne Roberts (University of Calgary)
    Abstract: Firms face many legal regulations, including corporate tax laws and labour laws. There are many ways for firms to evade these legal requirements. Firms may employ workers informally to skip out on safety or health standards or to avoid paying payroll taxes. Firms may also misreport sales transactions to minimize sales or business tax liabilities. Much of the literature examining firm behaviour assumes that a firm's decision to evade one type of regulation (such as labour regulation) is perfectly linked to the decision to evade another (such as corporate income taxes). In this paper, we separate these two evasion decisions and allow firms to decide whether to evade labour market regulations (including the payment of payroll taxes) independently from their decisions to evade business taxes. We find that the design of the tax system and firm entry decisions generate both positive and negative correlations between these two evasion decisions. We characterize the firms’ optimal entry and evasion behavior and derive the government's optimal tax policies. A pure pro t tax system with no payroll tax system, which is optimal in absence of business tax evasion, is no longer desirable when such evasion must be considered.
    Keywords: Informal Labour Market; Labour Regulation; Tax Evasion; Payroll taxes; Corporate Income Taxes
    JEL: H32 H26 K42
    Date: 2017–03
  8. By: Mark L. Egan; Gregor Matvos; Amit Seru
    Abstract: We examine gender discrimination in the financial advisory industry. We study a less salient mechanism for discrimination, firm discipline following missteps. There are substantial differences in the punishment of misconduct across genders. Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely. Following an incidence of misconduct, female advisers are 20% more likely to lose their jobs, and 30% less likely to find new jobs relative to male advisers. Females face harsher punishment despite engaging in less costly misconduct and despite a lower propensity towards repeat offenses. Evidence suggests that the observed behavior is not driven by productivity differences across advisers. Rather, we find supporting evidence for taste-based discrimination. For females, a disproportionate share of misconduct complaints is initiated by the firm, instead of customers or regulators. Moreover, there is significant heterogeneity among firms. Firms with a greater percentage of male executives/owners at a given branch, tend to punish female advisers more severely following misconduct, and also tend to hire fewer female advisers with past record of misconduct.
    JEL: D18 G24 G28 J71
    Date: 2017–03
  9. By: James Fetzer; Erich Strassner
    Abstract: Recent research has shown both the importance of accounting for trade in value added when estimating bilateral trade flows and that multinational enterprises located in the U.S. account for the lion’s share of U.S. trade in goods and services. However, trade in value added is typically accounted for using input-output tables that are aggregated across all types of firms. This paper presents experimental tables created by the U.S. Bureau of Economic Analysis comparing industry specific shares of the components of total output between globally engaged firms located in the United States that are part of a multinational enterprise (U.S. parents and U.S. affiliates) with those of firms that are part of an enterprise entirely located in the United States. The experimental tables will show to the extent possible how the components of total output differ between different types of firms. Future work will analyze this heterogeneity in more detail using establishment level data on production and trade.
    Keywords: United States, Trade issues, General equilibrium modeling
    Date: 2015–07–01

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