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on Business Economics |
| By: | Bryson, Alex (University College London); White, Michael (Policy Studies Institute) |
| Abstract: | A long-running debate in the small firms' literature questions the value of formal 'human resource management' (HRM) practices which have been linked to high performance in larger firms. We contribute to this literature by exploiting linked employer-employee surveys for 2004 and 2011. Using employees' intrinsic job satisfaction and organizational commitment as measures of motivation we find the returns to small firm investments in HRM are u-shaped. Small firms benefit from intrinsically motivating work situations in the absence of HRM practices, find this advantage disturbed when formal HRM practices are initially introduced, but can restore positive motivation when they invest intensively in HRM practices in a way that characterizes 'high performance work systems' (HWPS) and 'strategic human resource management' (SHRM). Although the HPWS effect on employee motivation is modified somewhat by the recessionary transition, it remains rather robust and continues to have positive promise for small firms. |
| Keywords: | small firms, human resource management, high performance work system, workplace motivation, intrinsic job satisfaction, organizational commitment |
| JEL: | L23 M50 M54 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10737&r=bec |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | When an outside innovating firm has a technology to produce a higher quality good than the good produced at present, it can sell licenses of its technology to incumbent firms, or enter the market and at the same time sell licenses, or enter the market without license. We examine the definitions of license fee in such a situation in an oligopoly with three firms under vertical product differentiation, one outside innovating firm and two incumbent firms, considering threat by entry of the innovating firm using a two-step auction. We also present an example of the optimal strategy for the innovating firm under the assumption of uniform distribution of consumers' taste parameter and zero cost. Also we suppose that the innovating firm sells its licenses using a combination of royalty per output and a fixed license fee. |
| Keywords: | royalty, license fee; entry; oligopoly; vertical differentiation; two-step auction |
| JEL: | D43 L13 |
| Date: | 2017–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78859&r=bec |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | We consider a choice of options for an innovating firm to enter the market with or without licensing its new cost-reducing technology to the incumbent firm using a combination of a royalty per output and a fixed license fee, or to license its technology without entry. With general demand and cost functions we show the following results. When the innovating firm licenses its technology to the incumbent firm without entry, the optimal royalty rate per output for the innovating firm is zero with negative fixed fee, and when the innovating firm enters the market and at the same time licenses its technology to the incumbent firm, the optimal royalty rate is positive with positive or negative fixed fee. Also we show that when cost functions are concave, the optimal royalty rate is one such that the incumbent firm drops out of the market and license without entry strategy and entry with license strategy are optimal for the innovator; and when cost functions are strictly convex, there is an internal solution of the optimal royalty rate under duopoly and entry with license strategy is optimal for the innovator. |
| Keywords: | duopoly, royalty, fixed license fee |
| JEL: | D43 L13 |
| Date: | 2017–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78854&r=bec |
| By: | Habermann, Harald |
| Abstract: | The present article links business takeovers to the literature on serial autocorrelation of growth rates. The aim of the study is to identify the effects of successions on the performance of small German firms by analysing the growth pathways over a period of eight years after business takeover. Using panel data from 1,872 firms, the present article shows that for the first two years after a business takeover, small firms are subject to negative serial correlation of growth rates regarding employment. The analysis underlines the importance of longitudinal data to provide evidence on changes in the behaviour of a firm following a business takeover. |
| Keywords: | business takeovers,successions,autocorrelation,panel data,small firms |
| JEL: | L25 M13 M21 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifmwps:0117&r=bec |
| By: | Frederiksen, Anders (Aarhus University); Kahn, Lisa B. (Yale University); Lange, Fabian (McGill University) |
| Abstract: | Supervisors occupy central roles in production and performance monitoring. We study how heterogeneity in performance evaluations across supervisors affects employee and supervisor careers and firm outcomes using data on the performance system of a Scandinavian service sector firm. We show that supervisors vary widely in how they rate subordinates of similar quality. To understand the nature of this heterogeneity, we propose a principal-agent model according to which supervisors can differ in their ability to elicit output from subordinates or in their taste for leniency when rating subordinates. The model also allows for variation in how informed firms are about this heterogeneity. Within the context of this model, we can discern the nature of the heterogeneity across supervisors and how informed firms are about this heterogeneity by relating observed supervisor heterogeneity in ratings to worker, supervisor, and firm outcomes. We find that subordinates are paid significantly more, and their pay is more closely aligned with performance, when they are matched to a highrating supervisor. We also find that higher raters themselves are paid more and that the teams managed by higher raters perform better on objective performance measures. This evidence suggests that supervisor heterogeneity stems, at least in part, from real differences in managerial ability and that firms are at least partially informed about these differences. We conclude by quantifying how important heterogeneity in supervisor type is for workers' careers. For a typical worker, matching to a high rater (90th percentile) relative to a low rater (10th percentile) for just one year results in an increase in the present discounted value of earnings equivalent to 7–14% of an annual salary. |
| Keywords: | labor, personnel economics, principal-agent, performance management systems, supervisors, organizational economics |
| JEL: | M5 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10725&r=bec |
| By: | Ronchi, Maddalena; di Mauro, Filippo |
| Abstract: | The paper aims at investigating to what extent wage negotiation setups have shaped up firms’ response to the Great Recession, taking a firm-level cross-country perspective. We contribute to the literature by building a new micro-distributed database which merges data related to wage bargaining institutions (Wage Dynamic Network, WDN) with data on firm productivity and other relevant firm characteristics (CompNet). We use the database to study how firms reacted to the Great Recession in terms of variation in profits, wages, and employment. The paper shows that, in line with the theoretical predictions, centralized bargaining systems – as opposed to decentralized/firm level based ones – were accompanied by stronger downward wage rigidity, as well as cuts in employment and profits. JEL Classification: J30, J50, D22, D61 |
| Keywords: | firm level analysis, global financial crisis, productivity, wage bargaining |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20172051&r=bec |
| By: | Wolfgang Keller (University of Colorado); William W. Olney (Williams College) |
| Abstract: | This paper examines the role of globalization in the rapid increase in top incomes. Using a com- prehensive data set of thousands of executives at U.S. firms from 1993-2013, we find that exports, along with technology and firm size, have contributed to rising executive compensation. Isolating changes in exports that are unrelated to the executive’s talent and actions, we show that global- ization has affected executive pay not only through market channels but also through non-market channels. Furthermore, exogenous export shocks raise executive compensation mostly through bonus payments in poor-governance settings, in line with the hypothesis that globalization has en- hanced the executive’s rent capture opportunities. Overall, these results indicate that globalization has played a more central role in the rapid growth of executive compensation and U.S. inequality than previously thought, and that rent capture is an important part of this story. |
| Keywords: | Inequality, Executive Compensation, Globalization, Exports |
| JEL: | F16 F14 F66 M12 J31 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2017-04&r=bec |
| By: | Schymik, Jan |
| Abstract: | Many industrialized economies have seen a rapid rise in top income inequality and in the globalization of production since the 1980s. In this paper I propose an open economy model of executive pay to study how offshoring affects the pay level and incentives of top earners. The model introduces a simple principal-agent problem into a heterogeneous firm talent assignment model and endogenizes pay levels and the sensitivity of pay to performance in general equilibrium. Using unique data of manager-firm matches including executives from stock market listed firms across the U.S. and Europe, I quantify the model predictions empirically. Overall, I find that between 2000 and 2014 offshoring has increased executive pay levels, raised earnings inequality across executives and increased the sensitivity of pay to firm performance. |
| Keywords: | Offshoring; Earnings Structure; Inequality; Incentives; Executive Compensation |
| JEL: | D2 F1 F2 J3 L2 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:38385&r=bec |
| By: | Sergio Mayordomo (Banco de España); Antonio Moreno (University of Navarra); Steven Ongena (University of Zurich, Swiss Finance Institute, KU Leuven, and CEPR); María Rodríguez-Moreno (Banco de España) |
| Abstract: | Little is known about the drivers and effectiveness of personal as opposed to real loan guarantees provided by firms. This paper studies a dataset of 477,209 loan contracts granted over the 2006-2014 period by one Spanish financial institution consisting of several distinguishable organisational units. While personal guarantees are mostly driven by the economic environment as reflected in firm and bank conditions, real guarantees are mostly explained by loan characteristics. In response to higher capital requirements imposed by the European authorities in 2011, personal guarantee requirements increased significantly more than their real counterparts. Our results imply that personal guarantees can discipline firms in their risk-taking, but their overuse can limit this positive effect and damage their performance. |
| Keywords: | banks, asymmetric information, real guarantees, personal guarantees, risk-taking, capital requirements |
| JEL: | D43 E32 G21 G32 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1715&r=bec |
| By: | Pantsios, Archontis L. (Liverpool Hope University); Polachek, Solomon (Binghamton University, New York) |
| Abstract: | The "joint costs" model states that the incentive to strike is inversely related to the total costs associated with workers' and firms' strike activities. Not only has this model been tested with mixed results, but also the joint costs model is problematic in explaining several stylized facts in the strike literature because higher strike costs do not always yield a lower incidence of strike activity. This paper illustrates how the joint cost model can yield these counterintuitive results. It shows that strike incidence need not decrease when joint strike costs increase. The innovation is to raise union and firm joint strike costs in an asymmetric way. Increasing a particular side's strike costs necessarily decreases its incentive to strike. However, in response, the other side's incentive can increase, since under a number of circumstances it holds out with a higher probability in order to collect the relatively larger expected rents coming about because the other side's implicit threat point decreases. To illustrate this, we model contract negotiations as a simple one-period game. (No need for more complex repeated games such as attrition since our point is only to show as simply as possible why the joint-costs model yields ambiguous results.) We use standard Hicksian concession curves to derive a payoff matrix. The payoff matrix results in contract negotiations following along the lines of a "game of chicken". The solution to the game yields no one stable pure Nash-equilibrium strategy, but instead a mixed strategy so that choices become probabilistic depending upon union and firm concession curve parameters. The results indicate that increasing either party's strike costs can have ambiguous effects on strike incidence. This ambiguity may explain why higher strike costs need not always lead to fewer strikes, and thus may account for the mixed success observed in studies that empirically test the joint costs model with strike incidence data. Although couched in terms of strikes, the results are equally applicable to other negotiation situations. |
| Keywords: | strike activity, joint strike costs, game of chicken |
| JEL: | J51 J52 C72 C78 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10723&r=bec |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | We consider a choice of options for an innovating firm in duopoly under vertical differentiation to enter the market with or without licensing its technology for producing a higher quality good to the incumbent firm using a combination of a royalty per output and a fixed license fee, or to license its technology without entry. With general distribution function of consumers' taste parameter and cost function we will show that when the innovating firm licenses its technology to the incumbent firm without entry, the optimal royalty rate per output is zero with negative fixed fee, and when the innovating firm enters the market with a license to the incumbent firm, its optimal royalty rate is positive with positive or negative fixed fee. Also we show that when cost function is concave, the optimal royalty rate is one such that the incumbent firm drops out of the market; and when cost function is strictly convex, there is an internal solution of the optimal royalty rate under duopoly. |
| Keywords: | duopoly, royalty, fixed license fee, vertical differentiation |
| JEL: | D43 L13 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78856&r=bec |
| By: | Girum Abebe; Stefano Caria; Marcel Fafchamps; Paolo Falco; Simon Franklin; Simon Quinn; Forhad Shilpi |
| Abstract: | Do matching frictions affect youth employment in developing countries? We organise job fairs in Addis Ababa, to match firms with a representative sample of young, educated job-seekers. We create very few jobs: one for approximately 10 firms that attended. We explore reasons for this, and find significant evidence for mismatched expectations: about wages, about firms requirements and about the average quality of job-seekers. We find evidence of learning and updating of beliefs in the aftermath of the fair. This changes behaviour: both workers and rms invest more in formal job search after the fairs. |
| Keywords: | Matching; labour; job-search; firms; recruitment; experiment |
| JEL: | O18 J22 J24 J61 J64 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2017-06&r=bec |