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on Business Economics |
| By: | A. Arrighetti; E. Bartoloni; F. Landini |
| Abstract: | An extensive literature documents large and persistent within-industry heterogeneity of firm performance. While some authors explain such evidence in terms of factor misallocation, we provide an alternative framework that is based on the interaction among exogenous and endogenous factors. Exogenous factors, both supply and demand-related, define the opportunity set that is available to firms. Endogenous factors reflect instead firm-specific interpretations of such set that combined with the available resources and capabilities determine firm’s strategic responses, which can be markedly heterogeneous. Whenever the diversity of firm conducts is associated with relatively small profit differentials, firm heterogeneity can persist. Evidence based on the evolution of labour productivity dispersion in the Italian manufacturing sector between the 1990s and early 2000s provides support for our interpretative framework. |
| Keywords: | firm heterogeneity; productivity; profit; misallocation; capabilities; Italy |
| JEL: | D24 L11 L25 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2017-ep02&r=bec |
| By: | Hartman-Glaser, Barney (UCLA); Lustig, Hanno (Stanford University); Zhang, Mindy X. (University of TX) |
| Abstract: | Although the aggregate capital share for U.S. firms has increased, the firm-level capital share has decreased on average. The divergence is due to the largest firms. While these mega-firms now produce a larger output share, their labor compensation has not increased proportionately. We develop a model in which firms insure workers against firm-specific shocks. More productive firms allocate more rents to shareholders, while less productive firms endogenously exit. Increasing firm-level risk delays the exit of less productive firms and increases the measure of mega-firms, raising the aggregate capital share and lowering it on average. We present evidence supporting this mechanism. |
| JEL: | E25 G31 G35 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3534&r=bec |
| By: | Geraldo Cerqueiro; María Fabiana Penas; Robert Seamans |
| Abstract: | We study the effect of debtor protection on firm entry and exit dynamics. We find that more lenient personal bankruptcy laws lead to higher firm entry, especially in sectors with low entry barriers. We also find that debtor protection increases firm exit rates and that this effect is independent of firm age. Our results overall indicate that changes in debtor protection affect firm dynamics. |
| Keywords: | Debtor Protection, Personal Bankruptcy, Entrepreneurship |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:17-42r&r=bec |
| By: | John Haltiwanger; Henry Hyatt; Erika McEntarfer |
| Abstract: | In this paper, we use linked employer-employee data to study the reallocation of heterogeneous workers between heterogeneous firms. We build on recent evidence of a cyclical job ladder that reallocates workers from low productivity to high productivity firms through job-to-job moves. In this paper we turn to the question of who moves up this job ladder, and the implications for worker sorting across firms. Not surprisingly, we find that job-to-job moves reallocate younger workers disproportionately from less productive to more productive firms. More surprisingly, especially in the context of the recent literature on assortative matching with on-the-job search, we find that job-to- job moves disproportionately reallocate less-educated workers up the job ladder. This finding holds even though we find that more educated workers are more likely to work with more productive firms. We find that while highly educated workers are less likely to match to low productivity firms, they are also less likely to separate from them, with less-educated workers both more likely to separate to a better employer in expansions and to be shaken off the ladder (separate to nonemployment) in contractions. Our findings underscore the cyclical role job-to-job moves play in matching workers to better paying employers. |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:17-63&r=bec |
| By: | Guillou, Sarah; Treibich, Tania (General Economics 2 (Macro)) |
| Abstract: | The objective of this paper is to show that part of the fixed cost of firms' trade expansion is due to the acquisition of new internal capabilities (e.g. technology, production processes or skills), which imply a costly change in the firm's internal labor organisation. We investigate the relationship between a firm's structure of labor, in terms of relative number of managers, and the scope of its export portfolio, in terms of product-destination varieties. The empirical analysis is based on a matched employer-employee dataset covering the population of French firms from tradable sectors over the period 2009-2014. Our analysis suggests that market expansion, and in particular export diversification, is associated with a change in the firm's workforce composition, namely an increase in the number of managerial layers and in the ratio of managers. We show how these results are consistent with a simple model where the complexity of a firm's operations increases in the number of product-destination couples exported, and where managers' role is to address the unsolved problems arising from such increased complexity of operations. |
| JEL: | F16 E24 C14 D22 |
| Date: | 2017–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2017026&r=bec |
| By: | Sarah Guillou (OFCE-Sciences PO Paris, France); Tania Treibich (Maastricht University and Sant'Anna school of Advanced Studies) |
| Abstract: | The objective of this paper is to show that part of the fixed cost of firms’ trade expansion is due to the acquisition of new internal capabilities (e.g. technology, production processes or skills), which imply a costly change in the firm’s internal labor organisation. We investigate the relationship between a firm’s structure of labor, in terms of relative number of managers, and the scope of its export portfolio, in terms of product-destination varieties. The empirical analysis is based on a matched employer- employee dataset covering the population of French firms from tradable sectors over theperiod 2009-2014. Our analysis suggests that market expansion, and in particular export diversification, is associated with a change in the firm’s workforce composition, namely an increase in the number of managerial layers and in the ratio of managers. We show how these results are consistent with a simple model where the complexity of a firm’s operations increases in the number of product-destination couples exported, and where managers’ role is to address the unsolved problems arising from such increased complexity of operations. |
| Keywords: | Export diversification, Managers, Occupations, Employer-Employee data. |
| JEL: | F16 E24 C14 D22 |
| Date: | 2017–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1722&r=bec |
| By: | Miguel Antón (IESE Business School, Universidad de Navarra); Florian Ederer (Cowles Foundation, Yale University); Mireia Giné (IESE Business School, Universidad de Navarra); Martin Schmalz (University of Michigan) |
| Abstract: | We show theoretically and empirically that managers have steeper financial incentives to expend effort and reduce costs when an industry’s firms tend to be controlled by shareholders with concentrated stakes in the firm, and relatively few holdings in competitors. A side effect of steep incentives is more aggressive competition. These findings inform a debate about the objective function of the firm. |
| JEL: | D21 G30 G32 J31 J41 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2046r&r=bec |
| By: | William F. Lincoln; Andrew H. McCallum; Michael Siemer |
| Abstract: | The collapse of international trade surrounding the Great Recession has garnered significant attention. This paper studies firm entry and exit in foreign markets and their role in the post-recession recovery of U.S. exports using confidential microdata from the U.S. Census Bureau. We find that incumbent exporters account for the vast majority of the decline in export volumes during the crisis. The recession also induced a missing generation of exporters, with large increases in exits and a substantial decline in entries into foreign markets. New exporters during these years tended to have larger export volumes, however, compensating for the decline in the number of exporting firms. Thus, while entry and exit were important for determining the variety of U.S. goods that were exported, they were less important for the trajectory of aggregate foreign sales. |
| Keywords: | Business cycles ; Entry ; Exit ; Exports ; Financial crisis ; Firm dynamics ; Great recession ; Recession |
| JEL: | F10 F40 E32 E44 J2 |
| Date: | 2017–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-108&r=bec |
| By: | Bholat, David (Bank of England); Brookes, James (Bank of England); Cai, Chris (Bank of England); Grundy, Katy (Bank of England); Lund, Jakob (Bank of England) |
| Abstract: | Our paper analyses confidential letters sent from the Bank of England’s Prudential Regulation Authority (PRA) to banks and building societies it supervises. These letters are a ‘report card’ written to firms annually, and are arguably the most important, regularly recurring written communication sent from the PRA to firms it supervises. Using a mix of methods, including a machine learning algorithm called random forests, we explore whether the letters vary depending on the riskiness of the firm to whom the PRA is writing. We find that they do. We also look across the letters as a whole to draw out key topical trends and confirm that topics important on the post-crisis regulatory agenda such as liquidity and resolution appear frequently. And we look at how PRA letters differ from the letters written by the PRA’s predecessor, the Financial Services Authority. We find evidence that PRA letters are different, with a greater abundance of forward-looking language and directiveness, reflecting the shift in supervisory approach that has occurred in the United Kingdom following the financial crisis of 2007–09. |
| Keywords: | Bank of England Prudential Regulation Authority; banking supervision; text mining; machine learning; random forests; Financial Services Authority; central bank communications |
| JEL: | C80 E58 G28 |
| Date: | 2017–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0688&r=bec |
| By: | Charlie Joyez (Université Paris-Dauphine, PSL Research University,IRD, LEDa, DIAL) |
| Abstract: | This paper develops a network approach of French multinationals' host countries network. It reveal and describe the expansion pattern of multinational firms through their affiliates, identifying core destinations, centralization degree of the network, and favorite countries linkages. The main results are in line with previous findings on foreign investment decision, location choices and gradual pattern. Further findings appear when looking at the network structure over time, showing an increasing geographical dispersion of affiliates. In addition, building directed networks allows us to observe upstream and downstream stages of internationalization. I later examine separately top productive firms network from least productive ones, and show the sensitivity of network structure to firm heterogeneity. |
| Keywords: | Network analysis; Weighted directed networks; Foreign direct investment; Multinational Firms; Firm heterogeneity; |
| JEL: | F23 L14 C45 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201708&r=bec |
| By: | Øystein Foros; Hans Jarle Kind |
| Abstract: | In several industries downstream competitors form upstream partnerships. An important rationale is that higher aggregate upstream volume might generate efficiencies that reduce both fixed and marginal costs. Our focus is on the latter. We show that if upstream marginal costs are decreasing in sales volume, then a partnership between downstream rivals will make them less aggressive. However, a partnership might nonetheless induce both partners and non-partners to charge lower prices. We also show that it might be better for two firms to form a partnership and compete downstream than to merge. Somewhat paradoxically, this is true if they compete fiercely in the downstream market with a third firm. The reason is that a merger is de facto a commitment to set higher prices. Under aggressive competition from the third firm, the members will not want to make such a commitment when upstream marginal costs are decreasing in output. |
| Keywords: | upstream partnership, imperfect competition, endogenous marginal costs |
| JEL: | D01 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6512&r=bec |
| By: | Lanteri, Andrea; Medina, Pamela |
| Abstract: | This paper studies the role of capital specificity and investment irreversibility on the distribution of marginal products of capital and aggregate TFP. We use a methodology new to the misallocation literature, based on the study of “mobility” across quantiles of a distribution. In a panel of Peruvian firms, we show that persistent dispersion in marginal products is explained to an important extent by the persistence of low marginal products. That is, by unproductive firms that take a long time to downsize. Using a quantitative general-equilibrium model of firm dynamics with idiosyncratic shocks, calibrated to match key features of our data, we argue that the persistence of low marginal products suggests that irreversibility frictions are large. Moreover, it is inconsistent with theories of misallocation based only on financing constraints. |
| Keywords: | Economía, Investigación socioeconómica, Productividad, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1107&r=bec |
| By: | Corritore, Matthew (Stanford University); Goldberg, Amir (Stanford University); Srivastava, Sameer B. (University of CA, Berkeley) |
| Abstract: | This article deepens our understanding of how the culture of an organization can reflect its underlying capacity for execution and creative exploration and thereby foreshadow how it will perform in the future. Existing literature often understands cultural diversity as presenting a trade-off between task coordination and creative problem-solving. In contrast, we conceptually unpack cultural heterogeneity into two distinct forms: compositional and content-based. We propose that the former undermines coordination and therefore portends worsening firm profitability, while the latter facilitates creativity and therefore predicts higher market expectations of future growth. To evaluate these propositions, we use unsupervised learning to identify cultural content in employee reviews of nearly 500 publicly traded firms on the Glassdoor website and then develop novel, time-varying measures of cultural heterogeneity. Using coarsened exact matching to reduce imbalance between firms exhibiting higher and lower levels of compositional and content-based heterogeneity, we find support for our two core propositions. |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3561&r=bec |
| By: | Dürr, Niklas S.; Hüschelrath, Kai |
| Abstract: | We study patterns of entry and exit in the German interurban bus industry in the first three years after its deregulation in January 2013. Using a comprehensive data set of all firm and route entries and exits, we find that the industry grew much quicker than originally expected - with particularly a few new entrants being most successful in quickly extending their route networks from regional to national coverage. Although the clear majority of routes is operated on a monopoly basis, competition does play a key role on routes with a sufficiently large base of (potential) customers. From a spatial perspective, three years after deregulation, the entire interurban bus network connects 60 percent of all 644 larger German cities - with the intensity of entry being dependent on the number of inhabitants, average income, the share of under 24 years old and the presence of intermodal competition by intercity railway services. |
| Keywords: | deregulation,interurban bus services,entry,exit,competition |
| JEL: | L11 L41 L43 L92 K21 K23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17041&r=bec |