nep-bec New Economics Papers
on Business Economics
Issue of 2018‒03‒26
fifteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firm-level Productivity Dispersion and Convergence By G. Cette; S. Corde; R. Lecat
  2. Large and Influential: Firm Size and Governments' Corporate Tax Rate Choice By Nadine Riedel; Martin Simmler
  3. Do Employee Spinoffs Learn Markets from their Parents? Evidence from International Trade By Marc-Andreas Muendler; James E. Rauch
  4. South-South FDI: Is It Really Different? By Gold, Robert; Görg, Holger; Hanley, Aoife; Seric, Adnan
  5. Firms' Global Engagement and Management Practices By Görg, Holger; Hanley, Aoife
  6. Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation By Robert W. Fairlie; Frank M. Fossen
  7. Centralized versus Decentralized Inventory Control in Supply Chains and the Bullwhip Effect By Raff, Horst; Qu, Zhan
  8. What drives productivity change in the manufacturing sector? Evidence from the metalworking industry in Ethiopia By Girum Abebe; Tigabu Degu; Gebrehiwot Ageba
  9. Shaking Up the Firm Survival: Evidence from Yogyakarta (Indonesia) By Aloysius Gunadi Brata; Henri (H.L.F.) de Groot; Wouter (W.) Zant
  10. Does Excellence Pay Off? Evidence from the Wine Market By Stefano Castriota
  11. Firm-Specific Training By Felli, Leonardo; Harris, Christopher J
  12. Earnings Dynamics, Mobility Costs, and Transmission of Market-Level Shocks By Magne Mogstad; Bradley Setzler; Thibaut Lamadon
  13. People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis By Mitchell Hoffman; Steven Tadelis
  14. Beyond the copper sector: Chile’s engagement in international production networks By Zaclicever, Dayna
  15. Globalization: Implications for firms in Germany By Görg, Holger; Hanley, Aoife

  1. By: G. Cette; S. Corde; R. Lecat
    Abstract: The productivity slowdown has been analysed as an effect of weaker technological progress, of the digital economy or of a less efficient reallocation process. Using data on firms operating in France, we highlight that, at the technological frontier, productivity has accelerated, especially over the recent period, which contradicts the hypothesis of a decline in innovation. The most productive firms in a given year do not, however, improve their relative advantage. The convergence of firms’ productivity does not seem to have slowed down in the 2000s, which does not confirm the hypothesis of a decrease in the dissemination of innovation. On the other hand, the dispersion of productivity between firms has increased, which suggests growing difficulties in reallocating production factors, labour and capital, between firms.
    Keywords: total factor productivity, dissemination of innovation.
    JEL: E22 L11 O47
    Date: 2018
  2. By: Nadine Riedel; Martin Simmler
    Abstract: Theory suggests that large firms are more likely to engage in lobbying behaviour and are geographically more mobile than smaller entities. Conditional on jurisdiction size, policy choices are thus predicted to depend on the shape of a jurisdiction’s firm size distribution, with more business-oriented policies being enacted if jurisdictions host large firms. The paper empirically tests this prediction using local business taxation in Germany as a testing ground. Exploiting rich and exogenous variation in localities’ firm size structures, we find evidence for an inverse relationship between the size of hosted entities and communities’ local business tax choices. The effect is statistically significant and quantitatively relevant, suggesting that the rising importance of large businesses may trigger shifts towards a more business-friendly design of (tax) policies.
    Keywords: firm size, corporation tax, political economy
    JEL: H20 H70
    Date: 2018
  3. By: Marc-Andreas Muendler; James E. Rauch
    Abstract: It is well established that employee spinoffs learn their parents’ technologies, but little is known about their demand-side learning. We exploit the identification in international trade data of parent markets (countries) to investigate whether exporting employee spinoffs of exporting parents have an advantage in accessing their parents’ markets over exporting comparison firms well positioned to learn those markets at arm’s length. We find that, controlling for the greater overlap of spinoffs with their parents’ export products, at entry spinoffs access 51 percent more parent markets than exporting firms in the same 4-digit industries and municipalities as the parents. This advantage shrinks monotonically with time, becoming statistically insignificant four years after entry, indicating that intrafirm learning provides spinoffs with a four-year head start over learning at arm’s length. Spinoffs do not overlap more than comparison firms with parent markets that the parents did not serve at spinoff entry, providing evidence against the alternative hypothesis that product overlap inadequately controls for greater technological similarity of spinoffs to parents. Firm entry into parent markets predicted by spinoff status does not lead to entry into “adjacent” markets the following year.
    Keywords: employee spinoffs, intrafirm learning, export spillovers, firm performance
    JEL: F14 L25 L26
    Date: 2018
  4. By: Gold, Robert; Görg, Holger; Hanley, Aoife; Seric, Adnan
    Abstract: We compare the performance of Northern and Southern multinationals in Sub-Saharan Africa, and contrast it with local firms in the host country. Employing unique firm level data for 19 Sub-Saharan African countries, we show that firms receiving FDI outperform domestic ones, while the origin of the foreign investor is of minor importance. We use four different definitions of "South" to compare Northern and Southern FDI. Overall, we do not find strong differences in terms of firm productivity growth between Northern and Southern FDI, irrespective of how the latter is defined. We also find that employment growth is generally higher for firms receiving FDI from other African investors as compared to Northern FDI, and they also receive more technology transfer from their parent company abroad.
    Keywords: South-South FDI,productivity,performance differences,Africa
    JEL: F23 O14
    Date: 2017
  5. By: Görg, Holger; Hanley, Aoife
    Abstract: We investigate whether firms' "global engagement", either in the form of exporting or opening up affiliates abroad, is related to the change in their management performance. We use new and unique data from a recent large scale firm survey of management practices in Germany. We calculate management scores for firms as in Bloom et al. (2013), which indicate how structured management is in a given firm. We find that switching into exporting, and to a lesser degree opening up affiliates abroad, is related to improving management performance in the sense of having more structured management practices.
    Keywords: Management practices,global engagement,exporting,outward investment
    JEL: F2 L2 M2
    Date: 2017
  6. 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: 2017
  7. By: Raff, Horst; Qu, Zhan
    Abstract: This paper constructs a model of a supply chain to examine how demand volatility is passed upstream through the chain. In particular, we seek to determine how likely it is that the chain experiences a bullwhip effect, where the variance of the upstream firm's production exceeds the variance of the downstream firm's sales. We show that the bullwhip effect is more likely to occur and is greater in size in supply chains in which inventory control is centralized rather than decentralized, that is, exercised by the downstream firm.
    Keywords: bullwhip effect,production smoothing,inventory,supply chain,demand uncertainty,stockout avoidance
    JEL: L22 L14 M11
    Date: 2017
  8. By: Girum Abebe (Ethiopian Development Research Institute); Tigabu Degu (Ethiopian Development Research Institute); Gebrehiwot Ageba (Ethiopian Development Research Institute)
    Abstract: We employ longitudinal data to explore sources of heterogeneity in productivity among firms in the metalworking industry in Ethiopia. We measure multifactor and labor productivity using non-parametric and regression residual parametric approaches. We find a sizable improvement in both labor productivity and TFP over time, which is also accompanied by large productivity dispersion across firms in the industry. The decomposition of industry-level productivity indicate that productivity increases is mostly explained by the reallocation of market shares across plants in the industry and that firm exit is preceded by declining productivity trends. Our reduced model also indicates that labor productivity and TFP is significantly higher in firms with a large share of workers with vocational training background. Productivity, however, does not differ with firm ownership. These results are robust to the choice of productivity measures.
    Keywords: metalworking, labor productivity, TFP, exit, entry, human capital
    JEL: O12 D24 J24
    Date: 2018–03
  9. By: Aloysius Gunadi Brata (Atma Jaya Yogyakarta University); Henri (H.L.F.) de Groot (Vrije Universiteit Amsterdam); Wouter (W.) Zant (Vrije Universiteit Amsterdam)
    Abstract: The survival of firms under changes in the business environment caused by exogenous shocks may be explained using economic Darwinism. Exogenous shocks can cause ‘cleansing effects’ as shocks clean out unproductive firms so that available resources are allocated to the remaining more productive firms. However, shocks may also force out young firms that are potentially highly productive in the future, which will lower the average productivity of industries. This is known as the ‘scarring effect’ of shocks. Therefore, the overall impact of exogenous shocks on the allocation of resources depends on the relative magnitude of cleansing and scarring effects. This paper investigates this natural selection mechanism after the Yogyakarta earthquake in 2006. The study uses data on medium-sized and large manufacturing firms in the Yogyakarta province collected by the Indonesian Statistical Agency. The main finding of this paper is that firms that had higher productivity prior to the earthquake in 2006 were more likely to survive after the earthquake, which suggests the existence of a natural selection mechanism causing cleansing effects. There is no evidence of scarring effects of the earthquake on the new entrants.
    Keywords: firm’s survival; exogenous shock; Yogyakarta earthquake; Indonesia
    JEL: D22 Q54 R11
    Date: 2018–03–07
  10. By: Stefano Castriota (Free University of Bolzano‐Bozen, Faculty of Economics and Management)
    Abstract: Product excellence is often considered a fundamental variable to increase prices, revenues and firm performance. However, while the effect of excellence on consumers’ willingness to pay and on revenues is not surprising, that on profits and especially on profitability is uncertain. In fact, excellence is expensive since production costs and capital requirements often increase at an exponential rate and could end up overwhelming the positive effects due to the additional revenues. The degree of vertical integration could reduce quality and profitability in sectors where final goods are complex and require specialized suppliers, or rather increase them if the good is more simple and the control of the full chain solves the problems of asymmetric information. Using Italian data from the 2004-2009 Veronelli wine guides we show that excellence – as measured by wine quality – and vertical integration – as measured by private instead of cooperative ownership – do lead to higher prices of the bottles sold. However, in a second exercise we study the determinants of Italian wineries’ Return of Invested Capital (ROIC) using AIDA 2006-2015 data merged with additional information from telephone surveys and wine guides. Using a number of econometric techniques we obtain mixed results. We show that excellence – as measured by firm and collective reputation – is irrelevant. Vertical integration – as measured by in house production of grapes and wine – ensures higher profitability, but the most profitable firms are bottlers which deliver the worst products. The most important driver of profitability is firm size, which allows realizing economies of scale and implementing effective export strategies.
    Keywords: Profitability; excellence; vertical integration; reputation; quality; price; wine
    JEL: L11 L14 L15 L23 L25
    Date: 2018–03
  11. By: Felli, Leonardo; Harris, Christopher J
    Abstract: This paper investigates the market provision of firm-specific training, and identifies the inefficiencies associated with it. Within a general stochastic learning-by-doing model, there is a potential inefficiency in the market provision of firm-specific training. In order to determine whether this inefficiency is in fact present, we analyze two special cases of the model: the accelerated productivity-enhancement model and the accelerated learning model. In both models, the inefficiency is indeed present. However, the nature of the inefficiency depends on the balance between the two key components of training, namely productivity enhancement and employee evaluation. In the accelerated productivity-enhancement model, training results in an increase in productivity enhancement but no change in employee evaluation, and training is overprovided by the market. In the accelerated learning model, training results in a proportionate increase in both productivity enhancement and employee evaluation, and training is underprovided by the market. In both cases, turnover is inefficiently low.
    Keywords: Specific human capital; Training; Learning-by-doing; Turnover; Productivity enhancement; Employee evaluation
    JEL: D61 D86 J20 J24
    Date: 2018–02
  12. By: Magne Mogstad (University of Chicago); Bradley Setzler (University of Chicago); Thibaut Lamadon (University of Chicago)
    Abstract: We study the cost of workers reallocation between firms, industries and regions. Using IRS tax records on individuals’ earnings together with data on firms balance sheet, we estimate the pass-through of firm, region, and industry shocks to workers earnings. Using a stylized static model, link these pass-through estimates to costs of reallocating workers. Finally, we introduce long-term contracts and study the non-linear transmission of productivity shocks to earnings.
    Date: 2017
  13. By: Mitchell Hoffman; Steven Tadelis
    Abstract: How much do a manager's interpersonal skills with subordinates, which we call people management skills, affect employee outcomes? Are managers rewarded for having such skills? Using personnel data from a large, high-tech firm, we show that survey-measured people management skills have a strong negative relation to employee turnover. A causal interpretation is reinforced by research designs exploiting new workers joining the firm and managers moving jobs. However, people management skills do not consistently improve non-attrition outcomes. Better people managers are themselves more likely to receive higher subjective performance ratings and to be promoted.
    JEL: D23 J24 J33 L23 M50
    Date: 2018–02
  14. By: Zaclicever, Dayna
    Abstract: Although international trade has been a major driver of Chile’s economic growth in the last decades, exports remain highly concentrated in the mining and metals sectors (which capture copper products at different levels of processing). This export specialization pattern reflects in Chile’s insertion in international production networks, where it is positioned as an upstream provider of low and medium lowtechnology inputs. This document analyses Chile’s engagement in international value chains along the period 1995- 2014, providing evidence at both the aggregate and firm level.
    Date: 2018–02–28
  15. By: Görg, Holger; Hanley, Aoife
    Abstract: This paper, however, is not about evaluating whether or not Germany has, on aggregate, done well out of globalization. Rather, we dig deeper into the economy and acknowledge the fact that it is not countries that trade or invest, but rather firms. We therefore look at data at the micro (firm or establishment) level to shed light on questions such as: What types of firms are involved in trade or investments? What distinguishes these globalized firms, if anything, from firms that are not engaged in these international activities? What benefits are there for the firms and also their workers?
    Date: 2017

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