nep-bec New Economics Papers
on Business Economics
Issue of 2017‒10‒08
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Externalities of Corruption: Evidence from Entrepreneurial Activity in China By Giannetti, Mariassunta; Liao, Guanmin; You, Jiaxing; Yu, Xiaoyun
  2. The Growth and Human Capital Structure of New Firms over the Business Cycle By Murmann, Martin
  3. Playing Favorites: How Firms Prevent the Revelation of Bad News By Cohen, Lauren; Lou, Dong; Malloy, Christopher
  4. Employment Effects of Innovations over the Business Cycle: Firm-Level Evidence from European Countries By Peters, Bettina; Hud, Martin; Dachs, Bernhard; Köhler, Christian
  5. Incentivizing Complex Problem Solving in Teams - Evidence from a Field Experiment By Englmaier, Florian; Grimm, Stefan; Schindler, David; Schudy, Simeon
  6. Team Incentives, Task Assignment, and Performance: A Field Experiment By Josse (J.) Delfgaauw; Robert (A.J.) Dur; Michiel Souverijn
  7. Why High-level Executives Earn Less in the Government Than in the Private Sector By Amihai Glazer; Hideki Konishi
  8. High-Growth Entrepreneurship By J. David Brown; John S. Earle; Mee Jung Kim; Kyung Min Lee
  9. Enabling Factors in Firms Adoption of New Digital Technologies. An Empirical Inquiry on a Manufacturing Region By Giancarlo Corò; Dejan Pejcic; Mario Volpe
  10. "Determinant Factors of Trade Industry Performance in Indonesia: AHP Approach" By Malik Cahyadin
  11. Business Cycle Dating and Forecasting with Real-time Swiss GDP Data By Christian Glocker; Philipp Wegmüller
  12. Competition, Selection, and Productivity Growth in the Chilean Manufacturing Industry By Roberto Álvarez; Aldo González
  13. Managerial investment in mutual funds: Determinants and performance implications By Abigail S. Hornstein; James Hounsell

  1. By: Giannetti, Mariassunta; Liao, Guanmin; You, Jiaxing; Yu, Xiaoyun
    Abstract: We show that corruption affects negatively the performance of small entrepreneurial firms, which compete with corrupted industry peers. We exploit the Chinese anti-corruption campaign to establish causality and identify the channels through which corruption causes negative externalities. Small firms have lower sales growth in industries with high corruption, arguably because demand is diverted to the largest firms in their industries, which spend more in corrupting officials. Small firms also have higher financing costs in industries with high corruption and therefore invest less. Furthermore, corruption decreases the efficiency of labor and capital allocation and deters firm entry.
    Keywords: capital and labor allocation; China; corporate governance; Corruption
    JEL: D22 D62 G30 L20 O12 P26
    Date: 2017–10
  2. By: Murmann, Martin
    Abstract: Recent research based on aggregate data suggests that employment in young firms is more negatively impacted during economic crises than employment in incumbent firms. Using firm-level data, we show that under constant human capital of the firms' founders, employment growth in less than 1 1/2-year-old start-ups reacts countercyclically and employment growth in older start-ups reacts procyclically. The young start-ups realize their countercyclical growth by hiring qualified labor market entrants.
    JEL: E32 J23 L26 M13 L25 L11 D22
    Date: 2017
  3. By: Cohen, Lauren; Lou, Dong; Malloy, Christopher
    Abstract: We explore a subtle but important mechanism through which firms can control information flow to the markets. We find that firms that "cast" their conference calls by disproportionately calling on bullish analysts tend to underperform in the future. Firms that call on more favorable analysts experience more negative future earnings surprises and more future earnings restatements. A long-short portfolio that exploits this differential firm behavior earns abnormal returns of up to 149 basis points per month, or almost 18 percent per year. We find similar evidence in an international sample of earnings call transcripts from the UK, Canada, France, and Japan. Firms with higher discretionary accruals, firms that barely meet/exceed earnings expectations, and firms (and their executives) that are about to issue equity, sell shares, and exercise options, are all significantly more likely to cast their earnings calls.
    Date: 2017–09
  4. By: Peters, Bettina; Hud, Martin; Dachs, Bernhard; Köhler, Christian
    Abstract: We investigate employment effects of innovations over the business cycle using data of manufacturing firms from 26 EU countries for the period 1998-2010. Using a structural model, our empirical analysis reveals three important findings: 1) The net effect of product innovation on employment growth is pro-cyclical. It is positive in all BC phases except for the recession. 2) Product innovators are more resilient to recessions than non-product innovators. 3) We only find resilience for SMEs.
    JEL: O33 J23 C26 D2
    Date: 2017
  5. By: Englmaier, Florian; Grimm, Stefan; Schindler, David; Schudy, Simeon
    Abstract: We study the role of bonuses, framed as gains and losses, in a unique environment that closely resembles many features of modern working environments: team work, knowledge re-combination and creative problem solving. We conduct a field experiment in cooperation with a provider of real life escape games. Bonuses significantly increase team performance in the field experiment whereas framing the bonus as a loss does not yield additional benefits as compared to the gain frame. We qualitatively replicate these findings with student participants in a lab-in-the field experiment that allows to study potential mechanisms underlying the productivity increase. Our findings suggest that the productivity increase among student participants result from two sources: First, single team members tend to become more dominant and to take more offten the initiative. Second, bonuses induce ”cutting corners” behavior among student participants. In contrast, teams in field experiment, who self-selected into the task, improve performance under bonus incentives without cutting corners more frequently. We discuss the implications of our findings for managers and firms designing contract structures in modern working environments.
    Keywords: team work,bonus,incentives,loss,gain,framing,creative
    JEL: C92 C93 J33 D03 M52
    Date: 2017
  6. By: Josse (J.) Delfgaauw (Erasmus University Rotterdam; Tinbergen Institute, The Netherlands); Robert (A.J.) Dur (Erasmus University Rotterdam, CESifo Munich, and IZA Bonn); Michiel Souverijn (Erasmus University Rotterdam)
    Abstract: The performance of a work team commonly depends on the effort exerted by the team members as well as on the division of tasks among them. However, when leaders assign tasks to team members, performance is usually not the only consideration. Favouritism, employees' seniority, employees' preferences over tasks, and fairness considerations often play a role as well. Team incentives have the potential to curtail the role of these factors in favor of performance -- in particular when the incentive plan includes both the leader and the team members. This paper presents the results of a field experiment designed to study the effects of such team incentives on task assignment and performance. We introduce team incentives in a random subsets of 108 stores of a Dutch retail chain. We find no effect of the incentive, neither on task assignment nor on performance.
    Keywords: Team incentives; Task assignment; Field experiment
    JEL: C93 M12 M52
    Date: 2017–09–22
  7. By: Amihai Glazer (Department of Economics, University of California, Irvine); Hideki Konishi (Faculty of Political Science and Economics, Waseda University)
    Abstract: Though governmental officials often have far greater responsibilities and make far more consequential decisions than do CEOs of private firms, government officials often earn far less. We offer explanations for the differences, considering Nash bargaining with the head of a governmental agency or with the CEO of a private firm. In the benchmark case, with a governmental agency providing consumer surplus in addition to profits, a governmental official earns more than a private CEO. But if for a governmental agency one official sets price and a different official negotiates pay, then under some conditions the head of a governmental agency will be paid less than the head of a for-profit firm. And in the plausible case where a governmental agency produces a non-excludable public good, and the agency is financed by a distortionary tax, then even if the consumer surplus generated at the governmental agency is greater than the profits of a for-profit firm, the head of the governmental agency may be paid less.
    Keywords: CEO pay, governmental officials, Nash bargaining, tax distortions, structure-induced equilibrium
    JEL: D23 H11 J31 J45
  8. By: J. David Brown; John S. Earle; Mee Jung Kim; Kyung Min Lee
    Abstract: We study the patterns and determinants of job creation for a large cohort of start-up firms. Analysis of the universe of U.S. employers reveals strong persistence in employment size from firm birth to age seven, with a small fraction of firms accounting for most employment at both ages, patterns that are little explained by finely disaggregated industry controls or amount of finance. Linking to data from the Survey of Business Owners on characteristics of 54,700 founders of 36,400 start-ups, and defining “high growth” as the top 5% of firms in the size distribution at age zero and seven, we find that women have a 30% lower probability of founding high-growth entrepreneurships at both ages. A similar gap for African-Americans at start-up disappears by age seven. Other differences with respect to race, ethnicity, and nativity are modest. Founder age is initially positively associated with high growth probability but the profile flattens after seven years and even becomes slightly negative. The education profile is initially concave, with advanced degree recipients no more likely to found high growth firms than high school graduates, but the former catch up to those with bachelor’s degrees by firm age seven, while the latter do not. Most other relationships of high growth with founder characteristics are highly persistent over time. Prior business ownership is strongly positively associated, and veteran experience negatively associated, with high growth. A larger founding team raises the probability of high growth, while diversity (by gender, age, race/ethnicity, or nativity) either lowers the probability or has little effect. More start-up capital raises the high-growth propensity of firms founded by a sole proprietor, women, minorities, immigrants, veterans, novice entrepreneurs, and those who are younger or with less education. Perhaps surprisingly, women, minorities, and those with less education tend to choose high growth industries, but fewer of them achieve high growth compared to their industry peers.
    Date: 2017–01
  9. By: Giancarlo Corò (Department of Economics, University Of Venice Cà Foscari); Dejan Pejcic (Department of Economics, University Of Venice Cà Foscari); Mario Volpe (Department of Economics, University Of Venice Cà Foscari)
    Abstract: This paper provides an analysis on the diffusion of the last generation digital technologies (Industry 4.0) in the Veneto region, one of the main manufacturing territory in Italy. Our attention focuses on factors that enable firms to adopt these technologies, with attention to three main aspects: the human capital endowment, the international openness, and the financial structure. Empirical analysis is based on a sample of firms that operate in manufacturing, construction and business services. Our analysis shows a heterogeneous diffusion of Industry 4.0 technologies across different industries, allowing the identification of distinct technologies frontiers among sectors. The logit regression shows a positive relation between the adoption of digital technologies and the openness to international markets, as well as with a highly skilled and highly educated human capital. The digital users show better productivity indexes than other firms, but at the same time financial performances are less clear. Hence, the firms that adopt new digital technologies have a more balanced financial structure, but they do not show higher profitability ratios than non-users. This result depends on a longer run return on investment and in a different distributive policy inside the firm.
    Keywords: Digital innovation, Industry 4.0, Enabling factors, Technological upgrading
    JEL: O33 L60 J24
    Date: 2017
  10. By: Malik Cahyadin (Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia Author-2-Name: Sutomo Author-2-Workplace-Name: Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia Author-3-Name: Lely Ratwianingsih Author-3-Workplace-Name: Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia)
    Abstract: "Objective – This research analyses determinant factors and priority factors of trade industry performance based on 15 industries in Indonesia. Today, trade industry tends to develop well in Indonesia. It covers exporters, importers, modern markets (hypermarket and minimarket), and traditional markets. Methodology/Technique – This research uses Analytic Hierarchy Process (AHP) to analyse primary data on factors of trade industry performance. Findings – Research results indicate that there are seven factors on trade industry performance. These are NF (AHP score: 0.37), ICT (0.19), BIT (0.10), BR (0.10), BP (0.09), DC (0.08), and BE (0.07). It means that number of firm becomes the first factor while business efficiency becomes the last factor that drives business performance. Novelty – This finding can be used by trade industry associations and policy makers to manage and regulate firms involved in commerce. In addition, governments can support ICT development to improve trade industry performance."
    Keywords: Determinant Factor; Trade Industry; Business Performance; AHP.
    JEL: L11 L25
    Date: 2017–04–06
  11. By: Christian Glocker (WIFO); Philipp Wegmüller
    Abstract: We develop a small-scale dynamic factor model for the Swiss economy based on an appropriately selected set of indicators. The resulting business cycle factor is in striking accordance with historical Swiss business cycle fluctuations. Our proposed model demonstrates a remarkable performance in short-term and medium-term forecasting. Using real-time GDP data since 2004, the model successfully anticipates the downturn of 2008-09 and responds in a timely manner to the recent sudden drop following the removal of the Swiss Franc lower bound. In a Markov-switching extension, we propose that our model could be used for Swiss recession dating. Our model does not indicate a regime-switch following the removal of the Swiss Franc lower bound.
    Keywords: Dynamic Factor Model, Nowcasting, Real-Time Data, Markov-Switching
    Date: 2017–10–02
  12. By: Roberto Álvarez; Aldo González
    Abstract: Recent evidence for several countries shows a decline in TFP growth. However, there is not much evidence for developing countries and much less regarding the impact of competition in product markets. In this paper, we analyze the impact of competition on selection and productivity growth in Chile. Our results indicate that competition has a positive effect on TFP growth and the probability of exit for lagging firms. Our results are robust to alternative methodologies for calculating TFP and to the inclusion of other variables that may affect firms’ TFP growth.
    Date: 2017–09
  13. By: Abigail S. Hornstein (Department of Economics, Wesleyan University); James Hounsell (Centerstone Investors, New York)
    Abstract: We examine the determinants of managerial investments in mutual funds and the subsequent impacts of these investments on fund performance. By using panel data we show thatinvestment levels fluctuate within funds over time, contrary to the common assumptionthat cross-sectional data are representative. Managerial investments reflect personal portfolio considerations while also signaling incentive alignment with investors. The impactof managerial investment on performance varies by whether the fund is solo- or team-managed. Fund performance is higher for solo-managed funds and lower for team-managedfunds when managers invest more. These results are consistent with the higher visibility ofsolo managers, and less extreme investment returns of team-managed funds. Our resultssuggest investors may not benefit from all managerial signals of incentive alignment asmanagerial investments also reflect personal portfolio considerations.
    Keywords: Mutual funds, Managerial ownership, Fund performance,Team management
    JEL: G29 G32
    Date: 2016–06

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