nep-bec New Economics Papers
on Business Economics
Issue of 2017‒04‒09
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Let' s Try Next Door: Technical Barriers to Trade and Multi-destination Firms By Lionel Fontagné; Gianluca Orefice
  2. Firms' global engagement and management practices By Görg, Holger; Hanley, Aoife
  3. Comparing Welfare and Profit in Quantity and Price Competition within Stackelberg Mixed Duopolies By Hirose, Kosuke; Matsumura, Toshihiro
  4. Capital market financing, firm growth, and firm size distribution By Tatiana Didier; Ross Levine; Sergio L. Schmukler
  5. An Analysis of Firm Characteristics as Earnings Determinants: The Urban Bolivia Case By Beatriz Muriel
  6. Positioning and Internalization in Global Value Chains: The Case of Tuscan Firms By Giorgia Giovannetti; Enrico Marvasi
  7. Online Appendix to "Human capital and the size distribution of firms" By Pedro Gomes; Zoe Kuehn
  8. Globalization and Innovation in the Indian Pharmaceutical Industry By Loitongbam, Bishwanjit Singh
  9. The adaptation of management control systems to different agents By Zhang, Jingwen
  10. Strategic corporate social responsibility by a multinational firm By Manasakis, Constantine; Mitrokostas, Evangelos; Petrakis, Emmanuel
  11. External financial dependence and firms' crisis performance across Europe By Peter S. Eppinger; Katja Neugebauer
  12. Worker Overconfidence: Field Evidence and Implications for Employee Turnover and Returns from Training By Mitchell Hoffman; Stephen V. Burks
  13. Double bank runs and liquidity risk management By Filippo Ippolito; José-Luis Peydró; Andrea Polo; Enrico Sette

  1. By: Lionel Fontagné (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Gianluca Orefice (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)
    Abstract: Highlights Stringent TBTs drive the average firm out of the market with a magnified effect for multi-destination players, who are encouraged to redirect their exports to other destinations (free of TBT concerns). Multi-destination firms are more likely to exit as a response to a stringent TBT. Thus, the imposition of a stringent TBT, by pushing multi-destination (high-productive) firms out of the market, reduces the average productivity of incumbent firms (i.e. the welfare of the imposing country). We combine aggregate estimations at sector-destination level with firm-level estimations and find that stringent TBTs represent mainly increases in fixed (more than variable) trade costs, with trade elasticity magnified for more homogeneous sectors.
    Keywords: Multi-destination Firms,Non-tariff Measures, TBT, Trade Margins
    Date: 2016–07
  2. By: Görg, Holger; Hanley, Aoife
    Abstract: We investigate whether firms' "global engagement", either in the form of exporting or opening up affiliates abroad, is related to the change in their management performance. We use new and unique data from a recent large scale firm survey of management practices in Germany. We calculate management scores for firms as in Bloom et al. (2013), which indicate how structured management is in a given firm. We find that switching into exporting, and to a lesser degree opening up affiliates abroad, is related to improving management performance in the sense of having more structured management practices.
    Keywords: management practices,global engagement,exporting,outward investment
    JEL: F2 L2 M2
    Date: 2017
  3. By: Hirose, Kosuke; Matsumura, Toshihiro
    Abstract: We compare welfare and profits under price and quantity competition in mixed duopolies, wherein a state-owned public firm competes against a private firm. It has been shown that price competition yields larger profit for the private firm and greater welfare if the two firms move simultaneously, regardless of whether the private firm is domestic or foreign. We investigate welfare and profit rankings under Stackelberg competition. Under public leadership, the profit and welfare rankings have common features with the simultaneous-move game, regardless of the nationality of private firms. By contrast, under private leadership, the result depends on the nationality of the private firm. When the private firm is domestic, welfare is greater under quantity competition, while the result is reversed when the private firm is foreign. However, regardless of nationality, private firms earn more under price competition. Introducing the nonnegative profit constraint in the public firm improves welfare and increases the private firm's profit, and price competition yields a higher profit for private firms regardless of nationality and which firm is the leader. However, this constraint affects the welfare ranking. Under private leadership, quantity competition yields greater welfare regardless of the nationality of the private firm. These results indicate that profit ranking is fairly robust to the time structure in mixed Stackelberg duopolies, but welfare ranking is not.
    Keywords: public leadership; private leadership; mixed markets; Cournot-Bertrand comparison
    JEL: H42 H44 L13 L32
    Date: 2017–03–20
  4. By: Tatiana Didier; Ross Levine; Sergio L. Schmukler
    Abstract: How many and which firms issue equity and bonds in domestic and international markets, how do these firms grow relative to non-issuing firms, and how does firm performance vary along the firm size distribution (FSD)? To evaluate these questions, we construct a new dataset by matching data on firm-level capital raising activity with balance sheet data for 45,527 listed firms in 51 countries. Three main patterns emerge from the analysis. (1) Only a few large firms issue equity or bonds, and among them a small subset has raised a large proportion of the funds raised during the 1990s and 2000s. (2) Issuers grow faster than non-issuers in terms of assets, sales, and employment, i.e., firms do not simply use securities markets to adjust their financial accounts. (3) The FSD of issuers evolves differently from that of non-issuers, tightening among issuers and widening among non-issuers. JEL Classification: F65, G00, G10, G31, G32, L25
    Keywords: access to finance, bond markets, capital market development, capital raisings, firm dynamics, firm financing, stock market
    Date: 2016–03
  5. By: Beatriz Muriel (Institute for Advanced Development Studies)
    Abstract: This article analyzes the importance of firm characteristics to explain earnings in urban Bolivia. Initially I propose a new simple theoretical model of segmented labor market where, in equilibrium, individual and firm variables jointly determine earnings at the worker level. The key for achieving this equilibrium is that workers have both specific preferences and heterogonous skills provided by years of schooling, which are in turn associated to certain firms. Given the household surveys information, I estimate two alternative earnings functions from this model, one for unsalaried workers, for which there is detailed firm data and one for salaried workers, in which sector, size and formality are used as firm proxies. I find not only that firm characteristics are fundamental determinants of earnings but that regressions that include only individual characteristics present highly overestimated coefficients.
    Keywords: earnings functions, labor market segmentation, firm characteristics, Bolivia
    JEL: C26 J20 J24 J31
    Date: 2016–12
  6. By: Giorgia Giovannetti (Dipartimento di Scienze per l'Economia e l'Impresa); Enrico Marvasi
    Abstract: The recent trade literature has shown how incomplete contracts can shape firms’ boundary and the decision of whether to outsource or integrate vertically. Related evidence and conceptualizations from the business literature show that buyer-supplier relations in global value chains can take several governance structures, depending on the degree of vertical coordination and power relations between firms. Building upon these two non-competing strands of the literature, we construct a taxonomy of firms that considers their positioning (upstream or downstream), their belonging to domestic or global value chains and the type of relations they entertain with other firms. We apply our taxonomy to the 2011 census of firms operating in Tuscany. We first describe regional characteristics and then study how positioning and governance affect firms’ decisions and performance.
    Keywords: Global value chains; Buyer-supplier relations; Heterogeneous firms; International trade.
    JEL: F14 F23
    Date: 2016
  7. By: Pedro Gomes (Universidad Carlos III de Madrid); Zoe Kuehn (Universidad Autonoma de Madrid)
    Abstract: Online appendix for the Review of Economic Dynamics article
    Date: 2017
  8. By: Loitongbam, Bishwanjit Singh
    Abstract: The changing global environment brings about new opportunities and new markets for domestic firms in developing countries. We examine the impacts of globalization and IPR protection on the innovation in the Indian pharmaceutical industry, using the firm-level panel data. This paper finds that there is a positive and highly significant level of foreign ownership effect on R&D activities. This indicates that there is technology spillover in the Indian pharmaceutical industry. TRIPS implementation has insignificant effects on R&D innovation. It is also found that exporting firms and firms with a higher productivity level are significantly more likely to carry out R&D activities.
    Keywords: Globalization, Foreign Ownership, Innovation, R&D
    JEL: F1 F14 F6
    Date: 2016–03–07
  9. By: Zhang, Jingwen (Tilburg University, School of Economics and Management)
    Abstract: Management control systems are commonly used by firms, but it is challenging to design an optimal control system because of the complexity of organizational contexts, and varieties of individuals with different preferences, beliefs and work relations within firms. In this dissertation, I examine how firms can adjust control decisions, such as target setting and monitoring intensity, to agents with different traits. I also study the outcome of implementing different controls, to describe how firms can benefit from this adaptation. In Chapter 2 we investigate how a principal can reduce the costs caused by explicit incentive contracts. We expect that the relation between principal and agents developed through repeated interactions can influence the target update process and help to mitigate the target ratchet effect. Using the data from a dealership, we empirically show that principals ratchet targets less for committed dealers in order to mute perverse effects of target ratcheting, and this motivates committed dealers to exert effort. Chapter 3 discusses the rationale of using same nonfinancial targets for each business unit (uniform targets) and investigates how to support the achievability of these targets, as uniform targets are not adjusted according to individual ability. We argue that firms may exploit the cause-and-effect relations between different performance measures to increase the achievability of nonfinancial targets (wage budget-employee satisfaction-customer satisfaction-revenue chain). We find that firms grant more wage budgets to managers who deliver substandard nonfinancial performance but outperform their peers, to facilitate their nonfinancial performance. Chapter 4 explores whether supervisors are able to know their agents and adapt monitoring intensity according to the tenure and confidence level of different agents. We predict and find that supervisors impose less monitoring to well-performed junior agents so that juniors can experiment and develop knowledge. We also find that monitoring increases for overconfident managers to control their risk-taking behavior. These results suggest that supervisors can indeed modify their level of direct supervision according to agent’s personal makeup and characteristics.
    Date: 2017
  10. By: Manasakis, Constantine; Mitrokostas, Evangelos; Petrakis, Emmanuel
    Abstract: This paper investigates the determinants of a responsible multinational firm's decision to enter in a foreign country either through exports or through foreign direct investment (FDI), as well as the relevant market and societal outcomes. We find that CSR investments are higher under FDI than under exports. The multinational firm's incentives to serve the foreign country through FDI are increasing in the average consumer's valuation for CSR and in the intensity of the foreign country's market competition, but only if the average consumer's valuation for CSR in this country is sufficiently high. These incentives are mitigated by the multinational firm's liability in this country under exports. We also find that there is misalignment of preferences between the stakeholders of the two countries over the multinational firm's mode of entry in the foreign country.
    Keywords: Corporate social responsibility,Multinational firms,Foreign direct investment,Exports,Import tariffs
    JEL: D43 F13 F23
    Date: 2017
  11. By: Peter S. Eppinger; Katja Neugebauer
    Abstract: Economic research has often relied on a measure of external financial dependence that is constructed using U.S. data and applied to other countries under the assumption of a stable industry ranking across countries. We exploit unique survey data from seven European countries to show that correlations of financial dependence across countries are weak, questioning this assumption. We then use the novel survey-based measure to show that the global financial crisis had a disproportionately negative impact on the real performance of financially dependent firms.
    Keywords: External financial dependence; financial constraints; financial crisis; firm performance.
    JEL: F10 G10 G30 L25
    Date: 2017–02
  12. By: Mitchell Hoffman; Stephen V. Burks
    Abstract: Combining weekly productivity data with weekly productivity beliefs for a large sample of truckers over two years, we show that workers tend to systematically and persistently over-predict their productivity. If workers are overconfident about their own productivity at the current firm relative to their outside option, they should be less likely to quit. Empirically, all else equal, having higher productivity beliefs is associated with an employee being less likely to quit. To study the implications of overconfidence for worker welfare and firm profits, we estimate a structural learning model with biased beliefs that accounts for many key features of the data. While worker overconfidence moderately decreases worker welfare, it also substantially increases firm profits. This may be critical for firms (such as the main one we study) that make large initial investments in worker training.
    JEL: D03 J24 J41 M53
    Date: 2017–03
  13. By: Filippo Ippolito; José-Luis Peydró; Andrea Polo; Enrico Sette
    Abstract: By providing liquidity to depositors and credit line borrowers, banks are exposed to doubleruns on assets and liabilities. For identification, we exploit the 2007 freeze of the European interbank market and the Italian Credit Register. After the shock, there are sizeable, aggregate double-runs. In the cross-section, pre-shock interbank exposure is (unconditionally) unrelated to post-shock credit line drawdowns. However, conditioning on firm observable and unobservable characteristics, higher pre-shock interbank exposure implies more post-shock drawdowns. We show that is the result of active pre-shock liquidity risk management by more exposed banks granting credit lines to firms that run less in a crisis. JEL Classification: G01, G21, G28
    Keywords: Credit lines, Liquidity risk, Financial crisis, Runs, Risk management
    Date: 2016–04

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