nep-bec New Economics Papers
on Business Economics
Issue of 2018‒02‒05
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Effects of government spending on employment: Evidence from winners and runners-up in procurement auctions By Gugler, Klaus; Weichselbaumer, Michael; Zulehner, Christine
  2. Organizational Belief, Managerial Vision, and International Trade By Jaewon Jung
  3. The Common Good of the Firm and Humanistic Management: Conscious Capitalism and Economy of Communion By Grant Michelson; Sandrine Frémeaux
  4. Foreign Currency Borrowing, Exports and Firm Performance: Evidence from a Currency Crisis By Spiros Bougheas; Hosung Lim; Simona Mateut; Paul Mizen; Cihan Yalcin
  5. Offshoring and Sequential Production Chains: A General Equilibrium Analysis By Philipp Harms; Jaewon Jung; Oliver Lorz
  6. Endogenous timing with a socially responsible firm By Garcia, Arturo; Leal, Mariel; Lee, Sang-Ho
  7. Firm wage premia, industrial relations,and rent sharing in Germany By Boris Hirsch; Steffen Mueller
  8. Man vs. Machine in Predicting Successful Entrepreneurs: Evidence from a Business Plan Competition in Nigeria By McKenzie, David J.; Sansone, Dario
  9. Do Subsidized Export Loans Increase Exports? By Y.Emre Akgunduz; S.Hilmi Kal; Huzeyfe Torun
  10. Matching firms and workers in a field experiment in Ethiopia By Abebe, Girum; Caria, Stefano; Fafchamps, Marcel; Falco, Paolo; Franklin, Simon; Quinn, Simon; Shilpi, Forhad
  11. Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation By Fairlie, Robert W.; Fossen, Frank M.
  12. Dinner Table Human Capital and Entrepreneurship By Hans K. Hvide; Paul Oyer

  1. By: Gugler, Klaus; Weichselbaumer, Michael; Zulehner, Christine
    Abstract: To estimate demand for labor, we use a combination of detailed employment data and the outcomes of procurement auctions, and compare the employment of the winner of an auction with the employment of the second ranked firm (i.e. the runner-up firm). Assuming similar ex-ante winning probabilities for both firms, we may view winning an auction as an exogenous shock to a firm's production and its demand for labor. We utilize data from almost 900 construction firms and about 3,000 auctions in Austria in the time period 2006 until 2009. Our main results show that the winning firm significantly increases labor demand in the weeks following an auction. In the years before the recent economic crisis, it employs about 80 workers more two months after the auction than the runner-up firm. Winners predominantly fire fewer workers after winning than runner-up firms. In the crisis, however, firms do not employ more workers than their competitors after winning an auction. We discuss explanations like labor hoarding and productivity adjustments induced by the crisis for these results.
    Keywords: construction procurement; first-price auctions; labor demand; labor hoarding; recent economic crisis
    JEL: D44 L10 L13
    Date: 2017–12
  2. By: Jaewon Jung (Université de Cergy-Pontoise, THEMA)
    Abstract: In this paper, we develop a simple general-equilibrium trade model in which heterogeneous workers make an investment decision in acquiring advanced managerial skills and choose their optimal effort level based on their own individual organizational beliefs and CEO’s managerial vision. In doing so, we show how trade liberalization and/or changes in managerial vision of CEO may lead to non-monotonic income changes within firms due to the interaction between workers’ beliefs and CEO’s managerial vision. Whether a stronger (or weaker) CEO’s managerial vision benefits the firm or not depends on its extent relative to workers’ overall beliefs, and may involve some winners and losers within firms.
    Keywords: Organizational belief, Managerial vision, Organizational change, International trade.
    JEL: F16
    Date: 2017
  3. By: Grant Michelson (Macquarie University - Macquarie University); Sandrine Frémeaux (Audencia Business School)
    Abstract: Businesses have long been admonished for being unduly focused on the pursuit of profit. However, there are some organizations whose purpose is not exclusively economic to the extent that they seek to constitute common good. Building on Christian ethics as a starting point, our article shows how the pursuit of the common good of the firm can serve as a guide for humanistic management. It provides two principles that humanistic management can attempt to implement: first, that community good is a condition for the realization of personal good, and second, that community good can only be promoted if it is oriented towards personal good. To better understand which community good can favor personal good and how it can be achieved, we examine two recent humanistic movements—Conscious Capitalism and Economy of Communion—that strive to participate in the common good. From the analysis of these two movements, we identify a shared managerial willingness to adopt the two principles. Moreover, we also reveal that Conscious Capitalism and Economy of Communion present different ways of linking community good and personal good, and therefore, different means exist for firms to participate in the common good.
    Keywords: Humanistic management, Personalist principle, Personal good,Christian ethics, Common good of the firm, Community good, Conscious capitalism, Economy of communion
    Date: 2017
  4. By: Spiros Bougheas; Hosung Lim; Simona Mateut; Paul Mizen; Cihan Yalcin
    Abstract: This paper develops a simple signalling model of foreign currency borrowing that yields predictions about firm survival and performance during a currency crisis. Using a large panel of firm level data for South Korea we offer empirical support for the predictions of our model. It demonstrates that although firms that borrow in foreign currency are more likely to exit after the currency collapses, those that survive perform better. Among them, the best performers are exporters whose foreign sales are now more competitive.
    Keywords: Currency crisis, Exports, Foreign currency borrowing
    JEL: F34 F41 G21 L25
    Date: 2018
  5. By: Philipp Harms; Jaewon Jung; Oliver Lorz (Université de Cergy-Pontoise, THEMA)
    Abstract: We present a two-region general equilibrium model in which firms exploit international wage differences by offshoring parts of the production process. Firms have to take into account that production steps follow a strict sequence and that transporting intermediate goods across borders is costly. We analyze how a change in transport costs and various properties of the production process affect offshoring patterns as well as factor prices, accounting for the general equilibrium effects of firms’ decisions. Interestingly, the influence of declining transport costs on the range of tasks offshored per firm may differ from the effect on the number of firms engaged in offshoring.
    Keywords: Offshoring, sequential production, global production chain, task trade.
    JEL: D24 F10 F23 L23
    Date: 2017
  6. By: Garcia, Arturo; Leal, Mariel; Lee, Sang-Ho
    Abstract: This study considers a mixed duopoly in which a socially responsible firm competes with a private firm by incorporating environmental externality and clean technology. We analyze the endogenous market structure in which both firms strategically decides quantities sequentially or simultaneously, which also affects abatement activities. We show that depending on the relative concerns on environment and consumers surplus, the socially responsible firm can be less or more aggressive in the production and abatement. Thus, not only the signifiicance of externality but also the instrumental conflict of social concerns are crucial factors in determining the equilibrium of endogenous timing game, in which the socially responsible firm might earn higher profits.
    Keywords: endogenous timing; socially responsible firm; mixed duopoly; clean technology; environmental externality
    JEL: L13 L31 Q5
    Date: 2018–01–18
  7. By: Boris Hirsch (Leuphana University Lueneburg, Germany); Steffen Mueller (Halle Institute for Economic Research (IWH) and University of Magdeburg, Germany)
    Abstract: This paper investigates the influence of industrial relations on firm wage premia in Germany. OLS regressions for the firm effects from a two-way fixed effects decomposition of workers’ wages by Card, Heining, and Kline (2013) document that average premia are larger in firms bound by collective agreements and in firms with a works council, holding constant firm performance. RIF regressions show that premia are less dispersed among covered firms but more dispersed among firms with a works council. Hence, deunionization is the only among the suspects investigated that contributes to explaining the marked rise in the premia dispersion over time.
    Keywords: firm wage premium, industrial relations, trade unions, works councils, bargaining power, rent sharing, wage inequality, Germany
    JEL: J31 J52 J53
    Date: 2018–02
  8. By: McKenzie, David J.; Sansone, Dario
    Abstract: We compare the relative performance of man and machine in being able to predict outcomes for entrants in a business plan competition in Nigeria. The first human predictions are business plan scores from judges, and the second are simple ad-hoc prediction models used by researchers. We compare these (out-of-sample) performances to those of three machine learning approaches. We find that i) business plan scores from judges are uncorrelated with business survival, employment, sales, or profits three years later; ii) a few key characteristics of entrepreneurs such as gender, age, ability, and business sector do have some predictive power for future outcomes; iii) modern machine learning methods do not offer noticeable improvements; iv) the overall predictive power of all approaches is very low, highlighting the fundamental difficulty of picking winners; and v) our models can do twice as well as random selection in identifying firms in the top tail of performance.
    Keywords: business plans; entrepreneurship; Machine Learning; Nigeria
    JEL: C53 L26 M13 O12
    Date: 2017–12
  9. By: Y.Emre Akgunduz; S.Hilmi Kal; Huzeyfe Torun
    Abstract: Turkey's export rediscount credit programme provides credit to exporting firms that is both easy to acquire and is offered at a low interest rate. We follow the performance of firms that first received the credit in 2012 when the amount of credit provided went up dramatically in 2012. We use propensity score mathing to construct a control group of firms with which we compare the credit-receiving firms before and after 2012 in a difference-in-differences framework. These firms have increased their exports substantially in the following years compared to the matched firms with similar propensities to receive the rediscount credit. We find that firms that received the rediscount credit increased their exports by 65% and total sales by 19% compared to matched firms. We find no statistically significant effects on domestic sales and profits. We also find suggestive evidence that the effects fade away after a certain amount of credits.
    Keywords: Subsidized credits, Exporting firms, Central banking, Propensity score matching
    JEL: F13 F14 L25 O24 E58
    Date: 2017
  10. By: Abebe, Girum; Caria, Stefano; Fafchamps, Marcel; Falco, Paolo; Franklin, Simon; Quinn, Simon; Shilpi, Forhad
    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 firms invest more in formal job search after the fairs
    Keywords: matching; labour; job-search; firms; recruitment; experiment
    JEL: J22 J24 J61 J64 O18
    Date: 2017–10–01
  11. By: Fairlie, Robert W. (University of California, Santa Cruz); Fossen, Frank M. (University of Nevada, Reno)
    Abstract: A common finding in the entrepreneurship literature is that business creation increases in recessions. This counter-cyclical pattern is examined by separating business creation into two components: "opportunity" and "necessity" entrepreneurship. Although there is general agreement in the previous literature on the conceptual distinction between these two factors driving entrepreneurship, there are many challenges to creating a definition that is both objective and empirically feasible. We propose an operational definition of opportunity versus necessity entrepreneurship using readily available nationally representative data. We create a distinction between the two types of entrepreneurship based on the entrepreneur's prior work status that is consistent with the standard theoretical economic model of entrepreneurship. Using this definition we document that "opportunity" entrepreneurship is pro-cyclical and "necessity" entrepreneurship is counter-cyclical. We also find that "opportunity" vs. "necessity" entrepreneurship is associated with the creation of more growth-oriented businesses. The operational distinction proposed here may be useful for future research in entrepreneurship.
    Keywords: opportunity entrepreneurship, necessity entrepreneurship, business creation, business cycle
    JEL: J22 J23 L26
    Date: 2018–01
  12. By: Hans K. Hvide; Paul Oyer
    Abstract: We document three new facts about entrepreneurship. First, a majority of male entrepreneurs start a firm in the same or a closely related industry as their fathers’ industry of employment. Second, this tendency is correlated with intelligence: higher-IQ entrepreneurs are less likely to follow their fathers. Third, an entrepreneur that starts a firm in the same 5-digit industry as where his father was employed tends to outperform entrepreneurs in the same industry whose fathers did not work in that industry. We consider various explanations for these facts and conclude that “dinner table human capital”, where children obtain industry knowledge through their parents, is an important factor behind what type of firm is started and how well it performs.
    JEL: G3 J24 L26
    Date: 2018–01

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