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on Business Economics |
| By: | Bengtsson, Lars (Faculty of Engineering, Lund University); Tavassoli, Sam (RMIT) |
| Abstract: | We analyze the effect of Business Model Innovation (BMI) on the product innovation performance of firms, based on a dynamic capabilities theoretical framework. Our empirical study is based on a large-scale representative sample of cross-industry Swedish firms participating in the last three waves of the Community Innovation Survey (CIS) from 2006–2012. Our findings provide support for the dynamics capabilities theoretical framework as well as broad evidence of a significant and positive association between BMI and product innovation performance. Our results imply that BMI in the form of product innovations combined with different complementary innovations will act as isolating mechanisms towards replication by competitors. Therefore, managers should frame product innovations as part of a business model innovation and dynamically adapt the key elements of the firm’s business model. |
| Keywords: | Business model innovation; Business models; Dynamic capabilities; product innovation; Innovation performance; Community Innovation Survey |
| JEL: | D22 L20 O31 O32 |
| Date: | 2018–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2018_004&r=bec |
| By: | Alex Bryson; John Forth |
| Abstract: | We examine the impact of management practices on firm performance among SMEs in Britain over the period 2011-2014, using a unique dataset which links survey data on management practices with firm performance data from the UK’s official business register. We find that SMEs are less likely to use formal management practices than larger firms, but that such practices have demonstrable benefits for those who use them, helping firms to grow and increasing their productivity. The returns are most apparent for those SMEs that invest in human resource management practices, such as training and performance-related pay, and those that set formal performance targets. |
| Keywords: | SMEs, small and medium-sized enterprises, employment growth, high-growth firms, productivity, workplace closure, management practices, HRM, recession |
| JEL: | L25 L26 M12 M52 M53 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:488&r=bec |
| By: | Geoffrey Barrows (CREST) |
| Abstract: | Many organizations around the world implement programs designed to encourage entrepreneurship, including grant prize awards, accelerator programs, incubators, etc. The goal of these programs is to supply entrepreneurs with early-stage support and visibility to help develop ideas and attract capital; but, if capital markets are efficient, good business ideas should find funding anyways. In this paper, I present evidence from the first global-scale, quasi-experimental study of whether entrepreneurship programs improve outcomes for start-up firms. I employ a regression discontinuity design to test whether winners of start-up program competitions perform better ex-post than losers, where the threshold rank for winning the competition provides exogenous variation in program participation. With 460 competitions across 113 countries and over 20,000 competing firms, I find that winning a competitions increases the probability of firm survival by 64%, the total amount of follow-on financing by $260,000 USD, and total employment by 47%, as well as other web-based metrics of firm success. Impacts are driven by medium-size prize competitions, and are precisely estimated both in countries where the costs of starting a business are low and where these costs are high. These results suggest that capital market frictions indeed prohibit start-up growth in many parts of the world. |
| Keywords: | Start-ups, Entrepreneurship, Credit Constraints, Prizes, Accelerators |
| JEL: | G24 L26 M13 O16 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2018.02&r=bec |
| By: | Geoffrey Barrows (CREST) |
| Abstract: | Many organizations around the world implement programs designed to encourage entrepreneurship, including grant prize awards, accelerator programs, incubators, etc. The goal of these programs is to supply entrepreneurs with early-stage support and visibility to help develop ideas and attract capital; but, if capital markets are efficient, good business ideas should find funding anyways. In this paper, I present evidence from the first global-scale, quasi-experimental study of whether entrepreneurship programs improve outcomes for start-up firms. I employ a regression discontinuity design to test whether winners of start-up program competitions perform better ex-post than losers, where the threshold rank for winning the competition provides exogenous variation in program participation. With 460 competitions across 113 countries and over 20,000 competing firms, I find that winning a competitions increases the probability of firm survival by 64%, the total amount of follow-on financing by $260,000 USD, and total employment by 47%, as well as other web-based metrics of firm success. Impacts are driven by medium-size prize competitions, and are precisely estimated both in countries where the costs of starting a business are low and where these costs are high. These results suggest that capital market frictions indeed prohibit start-up growth in many parts of the world. |
| Keywords: | Start-ups, Entrepreneurship, Credit Constraints, Prizes, Accelerators |
| JEL: | G24 L26 M13 O16 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:fae:ppaper:2018.02&r=bec |
| By: | Cohen, Daniel A. (University of Texas at Dallas - Naveen Jindal School of Management); Li, Bin (University of Texas at Dallas - Naveen Jindal School of Management); Li, Ningzhong (University of Texas at Dallas); Lou, Yun (Singapore Management University) |
| Abstract: | This study examines how a firm’s business relationship with the U.S. government, in particular, sales to the government, impacts its loan contract terms and how the effect is different from that of major corporate customers. We find that firms with major government customers have a lower number of covenants and are less likely to have performance pricing provisions in their loan contracts than other firms, whereas major corporate customers do not have such impacts. We do not find evidence that major government customers affect the supplier firm’s loan spread, security, or maturity. We conjecture that lenders benefit from the strict monitoring activities of the government customer and reduce the use of covenants and performance pricing in loan contracts when the borrowing firm has a government customer. |
| Keywords: | Government Customers; Loan Contract Terms |
| JEL: | G32 G38 |
| Date: | 2016–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1179&r=bec |
| By: | Jie Chen (Cardiff Business School, Cardiff University); Woon Sau Leung (Cardiff Business School, Cardiff University); Wei Song (School of Management, Swansea University); Marc Goergen (Cardiff Business School, Cardiff University) |
| Abstract: | We provide novel manifestations why female board representation matters. We find that male CEOs at firms with female directors are less likely to be overconfident as they hold fewer deep-in-the-money options. Female directors are associated with less aggressive investment policies, better acquisition decisions, and improved firm performance. This is the case for industries with high overconfidence prevalence, but not for those with low overconfidence prevalence. Finally, firms with female directors experience less of a drop in performance during the 2007-2009 financial crisis. These results are consistent with the view that female directors improve firm outcomes through reducing male CEO overconfidence in corporate decisions. |
| Keywords: | Female board representation, CEO overconfidence, Investment, Firm performance. |
| JEL: | G30 G32 G34 |
| Date: | 2018–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:swn:wpaper:2018-12&r=bec |
| By: | Yvonne Giesing; Nadzeya Laurentsyeva |
| Abstract: | This paper establishes a causal link between the emigration of skilled workers and firm performance in source countries. Using firm-level panel data from ten Eastern European countries, we show that the emigration of skilled workers lowers firm total factor productivity. We exploit time, country, and industry differences in the opening of EU labor markets from 2004 to 2014 as a source of exogenous variation in the emigration rates from new EU member states. We argue that a potential channel behind this effect relates to the reduction in firm-specific human capital due to a higher worker turnover. |
| Keywords: | migration, firm productivity, human capital, EU enlargement |
| JEL: | O15 D24 F22 J24 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6815&r=bec |
| By: | Kenichi Ueda (The University of Tokyo and TCER); Akira Ishide (The University of Tokyo); Yasuo Goto (Seijo University and RIETI) |
| Abstract: | We confirm, with a twist, that listing to a stock exchange can mitigate financial constraints of firms, using Japanese firm-level data over 20 years, 1995-2014, controlling for main-bank relationship and majority owner influence. Compared to a similar unlisted firm, a listed firm has a lower marginal product of capital on average and more new borrowings in recessions. Theoretically, we argue that these are key pieces of evidence to indicate less tight financial constraints for the listed firms than the unlisted. However, the listed firms do not borrow more on average over time. They rather maintain the lower leverage so that they can mitigate the borrowing constraints. We also find that the listed firms do not face lower interest rates. |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf429&r=bec |
| By: | Hwan Jo (National University of Singapore); Tatsuro Senga (Queen Mary University of London) |
| Abstract: | Government policies that attempt to alleviate credit constraints faced by small and young firms are widely adopted across countries. We study the aggregate impact of such targeted credit subsidies in a heterogeneous firm model with collateral constraints and endogenous entry and exit. A defining feature of our model is a non-Gaussian process of firm-level productivity, which allows us to capture the skewed firm size distribution seen in the Business Dynamics Statistics (BDS). We compare the welfare and aggregate productivity implications of our non-Gaussian process to those of a standard AR(1) process. While credit subsidies resolve misallocation of resources and enhance aggregate productivity, increased factor prices, in equilibrium, reduce the number of firms in production, which in turn depresses aggregate productivity. We show that the latter indirect general equilibrium effects dominate the former direct productivity gains in a model with the standard AR(1) process, as compared to our non-Gaussian process, under which both welfare and aggregate productivity increase by subsidy policies. |
| Keywords: | misallocation, collateral constraints, firm dynamics, firm size |
| JEL: | E22 G32 O16 |
| Date: | 2017–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:839&r=bec |
| By: | Jie Chen (Cardiff Business School, Cardiff University); Xicheng Liu (School of Management, Swansea University); Wei Song (School of Management, Swansea University) |
| Abstract: | This study examines the impact of managerial skill sets on corporate social responsibility (CSR). We show that firms with chief executive officers (CEOs) who gain general managerial skill sets through their lifetime work experience (i.e., generalist CEOs) tend to engage in less CSR. This finding remains consistent after considering potential endogenous matching between CEO types and firms, as well as alternative measures of CSR. We further show that the negative relationship between generalist CEOs and CSR becomes more prominent when CEOs are close to the timing of job-hopping, especially for firms with a higher level of institutional ownership and institutional investors who frequently alter their holding positions. These findings are consistent with the argument that CEOs who frequently face the short-term performance pressure from the labor market are reluctant to invest in projects which are likely to generate profits over the long run. |
| Keywords: | Corporate social responsibility; General human capital; Labor market evaluation; Long-term investment. |
| JEL: | G32 G34 J24 M14 |
| Date: | 2018–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:swn:wpaper:2018-16&r=bec |
| By: | Gryglewicz, Sebastian; Mayer, Simon; Morellec, Erwan |
| Abstract: | We develop a dynamic agency model in which the agent controls current earnings via short-term effort and firm growth via long-term effort and the firm is subject to both short- and long-run shocks. Under the optimal contract, agency conflicts can induce both over- and underinvestment in short- and long-term efforts compared to first best, leading to short- or long-termism in corporate policies. Exposure to long-run shocks introduces pay-for-luck in incentive compensation but only after sufficiently good performance due to incentive compatibility, thereby rationalizing the asymmetric benchmarking observed in the data. Correlated short- and long-run shocks to earnings and firm size lead to externalities in incentive provision over different time horizons. |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12720&r=bec |
| By: | Martin C. Schmalz |
| Abstract: | The question of whether and how partial common-ownership links between strategically interacting firms affect firm behavior has been the subject of theoretical inquiry for decades. Since then, consolidation and increasing concentration in the asset-management industry has led to more pronounced common ownership concentration (CoOCo). Moreover, recent empirical research has provided evidence consistent with the literature’s key predictions. The resulting antitrust concerns have received much attention from policy makers worldwide. However, the implications are more general: CoOCo affects the objective function of the firm, and therefore has implications for all subfields of economics studying corporate conduct - including corporate governance, strategy, industrial organization, and all of financial economics. This article connects the papers establishing the theoretical foundations, reviews the empirical and legal literatures, and discusses challenges and opportunities for future research. |
| Keywords: | ownership, control, network, industry concentration, antitrust, objective of the firm, shareholder unanimity |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6908&r=bec |
| By: | Robert W. Fairlie; Frank M. Fossen |
| 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. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1723&r=bec |
| By: | van den Berg, Gerard J. (Department of Economics, University of Bristol; IFAU); Gerdtham, Ulf G. (Health Economics Unit, Department of Clinical Sciences, Malmö, Lund University; Department of Economics, Lund University; Centre fo Economic Demography, Lund University); von Hinke, Stephanie (Department of Economics, University of Bristol); Lindeboom, Maarten (School of Business and Economics, Lund University); Sundquist, Jan (Faculty of Medicine, Lund University); Lissdaniels, Johannes (Health Economics Unit, Dept. of Clinical Sciences, Lund University; Swedish Agency for Health and Care Services Analysis); Sundquist, Kristina (Faculty of Medicine, Lund University) |
| Abstract: | There has been much interest recently in the relationship between economic conditions and mortality, with some studies showing that mortality is pro-cyclical, while others find the opposite. Some suggest that the aggregation level of analysis (e.g. individual vs. regional) matters. We use both individual and aggregated data on a sample of 20-64 year-old Swedish men from 1993 to 2007. Our results show that the association between the business cycle and mortality does not depend on the level of analysis: the sign and magnitude of the parameter estimates are similar at the individual level and the aggregate (county) level; both showing pro-cyclical mortality. |
| Keywords: | Death; recession; Health; unemployment; income; aggregation |
| JEL: | E30 I10 I12 |
| Date: | 2017–12–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2017_028&r=bec |
| By: | Delina Agnosteva; Constantinos Syropoulos; Yoto V. Yotov |
| Abstract: | We build a model of tacit collusion between firms that operate in multiple markets to study the effects of trade costs. A key feature of the model is that cartel discipline is endogenous. Thus, markets that appear segmented are strategically linked via the incentive compatibility constraint. Importantly, trade costs affect cartel shipments and welfare not only directly but also indirectly through discipline. Using extensive data on international cartels, we find that trade costs exert a negative and significant effect on cartel discipline. In turn, cartel discipline has a negative and significant impact on trade flows, in line with the model. |
| Keywords: | endogenous cartel discipline, competitiveness, multimarket contact, welfare, trade flows, trade costs, trade policy, gravity |
| JEL: | D43 F10 F12 F13 F15 F42 L12 L13 L41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6829&r=bec |
| By: | Bonhomme, Stéphane (University of Chicago); Lamadon, Thibaut (University of Chicago); Manresa, Elena (New York University) |
| Abstract: | We propose a framework to identify and estimate earnings distributions and worker composition on matched panel data, allowing for two-sided worker-firm unobserved heterogeneity. We introduce two models: a static model that allows for nonlinear interactions between workers and firms, and a dynamic model that allows in addition for Markovian earnings dynamics and endogenous mobility. We establish identi cation in short panels, and develop tractable two-step estimators where firms are classified into heterogeneous classes in a first step. Applying our method to Swedish administrative data, we find that log-earnings are approximately additive in worker and firm heterogeneity, with a strong association between workers and firms, and a small relative contribution of firm heterogeneity to earnings dispersion. In addition, we document that wages have a direct effect on mobility, and that, beyond their dependence on the current firm, earnings after a job move also depend on the past firm. |
| Keywords: | two-sided heterogeneity; bipartite networks; matched employer employee data; sorting; job mobility |
| JEL: | C23 J31 J62 |
| Date: | 2017–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2017_024&r=bec |