nep-bec New Economics Papers
on Business Economics
Issue of 2017‒12‒11
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Effects of a Day Off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailing By Foros, Øystein; Nguyen-Ones, Mai; Steen, Frode
  2. Heterogeneous Effects of Performance Pay with Market Competition: Evidence from a Randomized Field Experiment By Friebel, Guido; Heinz, Matthias; Khashabi, Pooyan; Kretschmer, Tobias; Zubanov, Nick
  3. Uncertainty Shocks and Firm Dynamics: Search and Monitoring in the Credit Market By Brand, Thomas; Isoré, Marlène; Tripier, Fabien
  4. Resource allocation and productivity across provinces in China By Peng Bin; Xiaolan Chen; Andrea Fracasso; Chiara Tomasi
  5. Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design By Giuseppina Gianfreda; Giovanna Vallanti
  6. Analysis of Merger Control in A Network Products Market By Tsuyoshi Toshimitsu
  7. Get the Balance Right: A Simultaneous Equation Model to Analyze Growth, Profitability, and Safety By Eling, Martin; Jia, Ruo; Schaper, Philipp
  8. Who Creates Jobs and Who Creates Productivity? Small versus Large versus Young versus Old By Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
  9. The Influence of Institutionally Embedded Ownership on Anglo-American Corporate Governance Migration into Emerging Economy IPO Firms By Hearn, Bruce; Oxelheim, Lars; Randøy, Trond
  10. Foreign Ownership and Intra-Firm Union Density in Germany By Jirjahn, Uwe
  11. Technological Spillovers, Product Market Rivalry and R&D Investment By Thomas Grebel; Lionel Nesta
  12. Confronting the zombies: Policies for productivity revival By Dan Andrews; Muge Adalet McGowan; Valentine Millot
  13. What's Behind the Figures? Quantifying the Cross-Country Exporter Productivity Gap By Kozo Kiyota; Toshiyuki Matsuura; Lionel Nesta

  1. By: Foros, Øystein; Nguyen-Ones, Mai; Steen, Frode
    Abstract: First, we analyze how regular days off from competition and a time-dependent price pattern affect firm performance. Second, we examine the effects on firms' profitability from consumers' changing search- and timing behavior. We use microdata from gasoline retailing in Norway. Since 2004, firms have practiced an industry-wide day off from competition, starting on Mondays at noon, by increasing prices to a common level given by the recommended prices (decided and published in advance). In turn, a foreseeable low-price window is open before every restoration. During the data period, we observe an additional weekly restoration on Thursdays at noon. The additional day off from competition increases firm performance. As expected, a conventional price search of where to buy reduces firms' profitability. In contrast, consumers who are aware of the cycle and spend effort on when to buy have a positive impact on firms' profitability. If consumers spend effort on when to buy, they attempt to tank during low price windows. By its very nature, this shrink consumers' ability to compare prices at several outlets. Consequently, more attention to when to buy may soften price competition.
    Keywords: firm performance; Gasoline markets; Pricing cycles
    JEL: D22 L25 L42 L81
    Date: 2017–12
  2. By: Friebel, Guido; Heinz, Matthias; Khashabi, Pooyan; Kretschmer, Tobias; Zubanov, Nick
    Abstract: It is well established that the effectiveness of pay-for-performance (PfP) schemes depends on employee- and firm-specific factors. Much less is known about the role of factors outside the firm. We investigate the role of market competition on the effectiveness of PfP. Our theory posits that there are two counteracting effects, a business stealing and a competitor response effect, that jointly generate an inverted U-shape relationship between PfP effectiveness and competition. Weak competition creates low incentives to exert effort because there is little extra market to gain, while strong competition creates low incentives as competitors respond more. PfP hence has the strongest effect for moderate competition. We test this prediction with a field experiment on a retail chain which confirms our theory and refutes alternative explanations.
    Keywords: business stealing; competitor response; Management Practices; market competition; pay for performance (PfP)
    Date: 2017–11
  3. By: Brand, Thomas; Isoré, Marlène; Tripier, Fabien
    Abstract: We develop a business cycle model with gross flows of firm creation and destruction. The credit market is characterized by two frictions. First, entrepreneurs undergo a costly search for intermediate funding to create a firm. Second, upon a match, a costly-state-verification contract is set up. When defaults occurs, banks monitor firms, seize their assets, and a fraction of financial relationships are severed. The model is estimated using Bayesian methods for the U.S. economy. Among other shocks, uncertainty in productivity turns out to be a major contributor to both macro-financial aggregates and firm dynamics.
    Keywords: Uncertainty shocks, Financial frictions, Search and Matching, Business Cycles, Firm Dynamics
    Date: 2017–12
  4. By: Peng Bin; Xiaolan Chen; Andrea Fracasso; Chiara Tomasi
    Abstract: The rapid economic development in China has been characterized by levels of income and productivity very heterogeneous across local areas. This work investigates a previously unexplored aspect of such heterogeneity by assessing the degree of within-industry allocative e ciency across provinces in China over the period 1998-2007. Us- ing firm-level data from the surveys conducted by the National Bureau of Statistics on the Chinese manufacturing firms, we measure the degree of resource misallocation by computing the within-industry covariance between size and productivity at the provincial level. The results suggest that within-industry allocative e ciency varies considerably across local areas and that some place-based factors strongly influence resources mobility. Our work sheds some light on the mechanisms at play in the dis- tribution of resources in China and it contributes to the literature investigating the degree of allocative effciency.
    Keywords: Allocative effciency, Resource allocation, Regional disparities, China
    JEL: D24 L25 O47 F41
    Date: 2017
  5. By: Giuseppina Gianfreda (Università della Tuscia); Giovanna Vallanti (LUISS "Guido Carli")
    Abstract: Compliance with labour law has costs and benefits which may depend on the institutional environment in which firms operate. Although several studies have documented a negative effect of informality on firms productivity and growth it is a fact that firms may resort to undeclared employment to escape excessive tax or regulatory burden. We argue that firms may respond to strict employment protection legislation through accrued informality thus (partially) offsetting the negative effect of informality on productivity. We exploit the Italian dismissal legislation imposing higher firing costs for firms with more than 15 workers and show that informality reduces the turnover of formal jobs for firms above the 15 workers threshold; furthermore, while the overall effect of informality on firms productivity is negative, the differential effect for firms above the threshold as compared to smaller firms is positive and significant.
    JEL: D02 D22 D24
    Date: 2017–12
  6. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: Using a horizontally differentiated three-firm model, we consider horizontal merger and antitrust policy in a network products market, where we observe network externalities and compatibilities (interconnectivities) between products and services. In particular, if the degree of network compatibilities in the case of a merger is sufficiently larger than that of product substitutability, consumer surplus is larger than in the premerger case. Thus, the proposed merger is allowed by antitrust authorities based on the positive effect on consumer surplus. In this case, the merger is Pareto improving.
    Keywords: horizontal merger; antitrust policy; network externality; compatibility; consumer surplus standard; horizontally differentiated Cournot competition
    JEL: D43 K21 L12 L15 L41
    Date: 2017–11
  7. By: Eling, Martin; Jia, Ruo; Schaper, Philipp
    Abstract: Extant literature suggests that the relationships among growth, profitability, and safety are reciprocal. Consequently, we develop a simultaneous equation model to test the three relationship pairs. Analyzing eleven years of data for 1,988 European insurance companies, we find that moderate firm growth has a positive impact on profitability; however, extremely high growth reduces profitability. Moderate firm growth also reduces firm risk. In addition, we document that less profitable companies are risk-seeking, a result in line with prospect theory. The longitudinal analysis illustrates that firms initially prioritizing profitability over growth are more likely to reach the ideal state of “profitable growth”.
    Keywords: firm performance, simultaneous equation model, goal conflicts, financial services, insurance
    Date: 2017–10
  8. By: Heyman, Fredrik (Research Institute of Industrial Economics (IFN)); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines employment and productivity dynamics in the Swedish business sector during the period 1996–2013. In order to analyze employment and productivity in a consistent way we apply a novel implementation of a method, which previously has been used extensively to analyze job dynamics, on both job and productivity dynamics. Our results, based on detailed matched employer-employee data for Sweden, indicate substantial heterogeneity in terms of job and productivity dynamics for different types of firms. We find that most of the net jobs were created in young, small firms, but at the same time we also find that most of the productivity gains were created in large old incumbent firms, thus suggesting a division of labor between the two. Our analysis provides new insights into the importance of age and size of firms in the restructuring process, stressing the dichotomy between employment growth and productivity growth in different types of firms.
    Keywords: Job dynamics; Productivity; Matched employer-employee data; Industrial structure and structural change
    JEL: E24 J23 L16 L25 L26
    Date: 2017–11–20
  9. By: Hearn, Bruce (School of Business, Management and Economics,); Oxelheim, Lars (School of Business and Law, University of Agder, Norway); Randøy, Trond (School of Business and Law, University of Agder, Norway)
    Abstract: We argue that the corporate governance of emerging economy IPO firms is influenced by firm-specific institutionally embedded block ownership groups. Applying an extended institutional logic perspective and using a mixed-effects ordered probit model, our findings from 190 IPO-firms from 22 African countries 2000–2016, support the notion that five major block owner categories (corporate, private equity, non-executive, business group, state) exerts very different influence on African firms’ degree of adoption of Anglo-American corporate governance measures. We find that the influence from the various block owner groups is significantly moderated by institutional quality and tribalism, but to different degrees and directions across block owner groups. Our contextually embedded firm-specific results support the criticism of a one-hat-fits-all global and uniform corporate governance model.
    Keywords: IPO; Corporate Governance Practice; Institutional Theory; Africa; Emerging Economies
    JEL: G23 G38 M12 M14 M16
    Date: 2017–11–20
  10. By: Jirjahn, Uwe
    Abstract: From a theoretical viewpoint the relationship between foreign ownership and unionization is ambiguous. On the one hand, foreign owners have better opportunities to undermine workers’ unionization. On the other hand, workers of foreign-owned firms have an increased demand for the protection provided by unions. Which of the two opposing influences dominates can vary according to moderating circumstances. This study shows that firm size and industry-level bargaining play a moderating role. The relationship between foreign ownership and unionization is negative in larger firms whereas it is positive in smaller firms. Coverage by industry-level collective bargaining makes a positive relationship both stronger and more likely.
    Keywords: Corporate Globalization,Foreign Direct Investment,Union Membership,Firm Size,Centralized Collective Bargaining
    JEL: F23 J51 J52
    Date: 2017
  11. By: Thomas Grebel (Technische Universität Ilmenau, Germany); Lionel Nesta (Université Côte d'Azur; GREDEG CNRS; OFCE Sciences Po.; SKEMA Business School)
    Abstract: We investigate the determinants of the sign of R&D reaction functions of two rival firms. Using a two-stage Cournot competition game, we show that this sign depends on four types of environments in terms of product rivalry and technology spillovers. We test the predictions of the model on the world's largest manufacturing corporations. Assuming that firms make R&D investments based on the R&D effort of the representative rival company, we develop a dynamic panel data model that accounts for the endogeneity of the decision of the rival firm. Empirical results corroborate the validity of the theoretical model.
    Keywords: Process R&D, Spillovers, Product substitution, Reaction function, GMM
    JEL: D43 L13
    Date: 2017–11
  12. By: Dan Andrews; Muge Adalet McGowan; Valentine Millot
    Abstract: Policies that spur more efficient corporate restructuring can revive productivity growth by targeting three inter-related sources of labour productivity weakness: the survival of “zombie” firms (low productivity firms that would typically exit in a competitive market), capital misallocation and stalling technological diffusion. New OECD policy indicators show that there is much scope to improve the design of insolvency regimes in order to reduce the barriers to restructuring of weak firms and the personal costs associated with entrepreneurial failure. Insolvency regime reform can not only address the aforementioned sources of productivity weakness but also enhance the productivity impacts of reducing entry barriers in product markets. As the zombie firm problem may partly stem from bank forbearance, complementary reforms to insolvency regimes are essential to ensure that a more aggressive policy to resolve non-performing loans is effective. Distortions in the banking sector highlight the importance of market-based financing instruments for productivity growth with the inherent debt bias in corporate tax systems emerging as a key barrier to technological diffusion. Finally, well-designed job search and retraining policies are effective at returning workers displaced by firm exit to work, particularly in environments where barriers to firm entry are low.
    Keywords: banks, capital misallocation, firm exit, insolvency, Productivity, zombie firms
    JEL: D24 G21 G32 G33 G34 J63 J68 K35 L25 O16 O40 O43 O47
    Date: 2017–12–06
  13. By: Kozo Kiyota (Keio Economic Observatory, Keio University); Toshiyuki Matsuura (Keio Economic Observatory, Keio University); Lionel Nesta (Université Côte d'Azur; GREDEG CNRS; OFCE Sciences Po.; SKEMA Business School)
    Abstract: We present a simple framework that allows us to examine the cross-country exporter productivity gap without accessing confidential firm-level data. This gap depends on the three readily available statistics: the productivity gap between two countries; the export participation rates; and export premia. This gap holds irrespective of the data generating process and independent of sunk costs of entering domestic markets. Under specific conditions, allocative efficiency may affect the exporter productivity gap. Additional assumptions on the log-normality of the productivity distribution of firms allow one to recover the export threshold and heterogeneity parameters. The empirical analysis globally validates this exercise.
    Keywords: International productivity gap, Export premia, Competitiveness, Meta analysis
    JEL: F1 D24
    Date: 2017–11

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