nep-bec New Economics Papers
on Business Economics
Issue of 2018‒04‒16
sixteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firms and Economic Performance: A view from Trade By Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
  2. 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; Frode, Steen
  3. Structural Change in Firm Dynamics, Inter-firm Network, and Geography (Japanese) By OGURA Yoshiaki; SAITO Yukiko
  4. Eco-strategies and firm growth in European SMEs By Jové Llopis, Elisenda,; Segarra Blasco, Agustí, 1958-
  5. Spillovers and R&D Incentive under Incomplete Information By Chatterjee, Rittwik; Chattopadhyay, Srobonti; Kabiraj, Tarun
  6. Innovation, Productivity Dispersion, and Productivity Growth By Lucia Foster; Cheryl Grim; John C. Haltiwanger; Zoltan Wolf
  7. Detrending and financial cycle facts across G7 countries: mind a spurious medium term! By Schüler, Yves S.
  8. An evaluation of knowledge management system's components and its financial and non-financial implications By André Luhn; Sergey Aslanyan; Christian Leopoldseder; Pamela Priess
  9. Innovation Networks and Clusters Dynamics By He, Ming; Walheer, Barnabé
  10. Customer recognition and mobile geo-targeting By Baye, Irina; Reiz, Tim; Sapi, Geza
  11. What is the Impact of Successful Cyberattacks on Target Firms? By Shinichi Kamiya; Jun-Koo Kang; Jungmin Kim; Andreas Milidonis; René M. Stulz
  12. Entry Games under Private Information By José-Antonio Espín-Sánchez; Álvaro Parra
  13. Bargaining tools for the resolution of distressed firms: judicial composition with creditors By Alesssandro Danovi; Silvia Giacomelli; Patrizia Riva; Giacomo Rodano
  14. R&D, IP, and firm profits in the North American automotive supplier industry By Lutz, Stefan Heinz Hermann
  15. Credit Misallocation During the European Financial Crisis By Fabiano Schivardi; Enrico Sette; Guido Tabellini
  16. To acquire or not to acquire: Mergers and Acquisitions in the Software Industry By Méndez Ortega, Carles,; Teruel, Mercedes

  1. By: Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
    Abstract: We use transaction-level US import data to compare firms from virtually all countries in the world competing in a single destination market. Guided by a simple theoretical framework, we decompose countries'market shares into the contribution of the number of firm-products, their average attributes (quality and efficiency) and heterogeneity around the mean. Our results show that the number of firm-products explains half of the variation in sales, while the remaining part is equally accounted for by average attributes and their dispersion. Quality is the main driver of firm heterogeneity (explaining between 75% and 100%). We then study how the distribution of firm-level characteristics varies across countries, and we explore some of its determinants. Countries with a larger market size tend to be characterized by a more dispersed distribution of firms'sales, especially due to heterogeneity in quality. These countries also tend to be more likely to host superstar firms, although this is not the only source of higher heterogeneity. To further explore the role of exceptional firms, we develop a novel decomposition that separates the contribution of heterogeneity from that of granularity. While individual firms matter, we find that heterogeneity is more important than granularity for explaining sales.
    Keywords: US imports, firm heterogeneity, international trade, prices, Quality, variety, granularity
    JEL: F12 F14
    Date: 2018–03
  2. By: Foros, Øystein (NHH, Department of Business and Management Science); Nguyen-Ones, Mai (NHH, Department of Business and Management Science); Frode, Steen (Dept. of Economics, Norwegian School of Economics and Business Administration)
    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: Pricing cycles; Firm performance; Gasoline markets
    JEL: D22 L25 L42 L81
    Date: 2017–11–16
  3. By: OGURA Yoshiaki; SAITO Yukiko
    Abstract: This paper investigates how firm dynamics, such as firm growth and firm exit, are influenced in an unpreceded aging society using firm-level panel data for 10 years. We find that both firm age and executive age increase due to insufficient entry and exit rates and executive turnover, especially for firms in periphery regions, which prevents firm growth. Because executive age is positively related to firm exit rate, we expect that firm exit rate will increase in the future. Firm exit caused by the transaction partner's exit, i.e., chain of exit, occurs more frequently in periphery regions because low firm location density increases the search cost of new transaction partners. These results imply the necessity of policy depending on firm age stage and regions.
    Date: 2018–03
  4. By: Jové Llopis, Elisenda,; Segarra Blasco, Agustí, 1958-
    Abstract: This study investigates the effects of eco-strategies on firm performance in terms of sales growth in an extensive sample of 11,336 small and medium-sized enterprises (SMEs) located in 28 European countries. Our empirical results suggest that not all eco-strategies are positively related to better performance, at least not in the short term. We find that European companies using renewable energies, recycling or designing products that are easier to maintain, repair or reuse perform better. Those that aim to reduce water or energy pollution, however, seem to show a negative correlation to firm growth. Our results, also, indicate that high investment in eco-strategies improves firm growth, particularly in new members that joined the EU from 2004 onwards. Finally, we observe a U-shaped relationship between eco-strategies and firm growth, which indicates that a greater breadth of eco-strategies is associated with better firm performance. However, few European SMEs are able to either invest heavily or undertake multiple eco-strategies, thus leaving room for policy interventions. Keywords: eco-strategy, firm growth, Europe, SMEs
    Keywords: Empreses petites i mitjanes -- Aspectes ambientals -- Unió Europea, Països de la, Planificació estratègica -- Aspectes ambientals, Empreses -- Creixement, 33 - Economia, 65 - Gestió i organització. Administració i direcció d'empreses. Publicitat. Relacions públiques. Mitjans de comunicació de masses,
    Date: 2017
  5. By: Chatterjee, Rittwik; Chattopadhyay, Srobonti; Kabiraj, Tarun
    Abstract: Spillovers of R&D outcome affect the R&D decision of a firm. The present paper discusses the R&D incentives of a firm when the extent of R&D spillover is private information to each firm. We construct a two stage game involving two firms when the firms first decide simultaneously whether to invest in R&D or not, then they compete in quantity. Assuming general distribution function of firm types we compare R&D incentives of firms under alternative scenarios based on different informational structures. The paper shows that while R&D spillovers reduce R&D incentives under complete information unambiguously, however, it can be larger under incomplete information.
    Keywords: R&D incentives, Cournot duopoly, Spillovers, Incomplete information
    JEL: D43 D82 L13 O31
    Date: 2018–03–09
  6. By: Lucia Foster; Cheryl Grim; John C. Haltiwanger; Zoltan Wolf
    Abstract: We examine whether underlying industry innovation dynamics are an important driver of the large dispersion in productivity across firms within narrowly defined sectors. Our hypothesis is that periods of rapid innovation are accompanied by high rates of entry, significant experimentation and, in turn, a high degree of productivity dispersion. Following this experimentation phase, successful innovators and adopters grow while unsuccessful innovators contract and exit yielding productivity growth. We examine the dynamic relationship between entry, productivity dispersion, and productivity growth using a new comprehensive firm-level dataset for the U.S. We find a surge of entry within an industry yields initially an increase in productivity dispersion and then after a significant lag an increase in productivity growth. These patterns are more pronounced for the High Tech sector where we expect there to be more innovative activities. These patterns change over time suggesting other forces are at work during the post-2000 slowdown in aggregate productivity.
    JEL: E24 L26 M13 O31
    Date: 2018–03
  7. By: Schüler, Yves S.
    Abstract: I show that the detrending of financial variables with the Hodrick and Prescott (1981, 1997) (HP) and band-pass filters leads to spurious cycles. I find that distortions become especially severe when considering medium-term cycles, i.e., cycles that exceed the duration of regular business cycles. In particular, these medium-term filters amplify the variances of cycles of duration around 20 to 30 years up to a factor of 204, completely cancelling out shorter-term fluctuations. This is important because it is common practice, and recommended under Basel III, to extract medium-term cycles using such filters; e.g., the HP filter with a smoothing parameter of 400,000. In addition, I find that financial cycle facts, i.e., differing amplitude, duration, and synchronisation of cycles in financial variables relative to cycles in GDP, are robust. For HP and band-pass filters, differences to GDP become marginal due to spurious cycles. JEL Classification: C10, E32, E44, E58, G01
    Keywords: credit-to-GDP gap, detrending, financial cycles, macroprudential policy, spurious cycles
    Date: 2018–03
  8. By: André Luhn (Pan-European University); Sergey Aslanyan (Pan-European University); Christian Leopoldseder (Pan-European University); Pamela Priess (Pan-European University)
    Abstract: Knowledge Management is an inclusive process of gathering knowledge, processing it and then utilising it in order to improve firm productivity and seek solutions to crucial problems. This paper is based on the assessment of structural framework of a Knowledge Management System (KMS) and how these components influence the financial and non-financial aspects of an organisation. The study mainly focuses on the evaluating the influence of KMS on the overall performance of SMEs in Austria. The current study investigates previous researches and theories to build a comprehensive understanding of the topic. It also conducts a quantitative analysis to evaluate the relationships between Knowledge Management Capabilities, Processes, and Firm Performance. To get first-hand information related to knowledge management practices, 126 managers and senior employees from 72 Austrian SMEs are surveyed. According to the results, KM capabilities have a significant positive relationship with KM processes. Moreover, KM processes in the Austrian SMEs have a significant positive influence on financial and non-financial performance. The study recommends increased focus on KM practices for improved overall performance.
    Keywords: Knowledge Management Capabilities,Knowledge Management Systems,Correlation,Regression Analysis,Learning Organisation,T-Shaped Skills,Non-Financial Performance,Financial Performance,Knowledge Management Processes
    Date: 2017–12–29
  9. By: He, Ming (Division of Economics, Xi'an Jiaotong-Liverpool); Walheer, Barnabé (Division of Economics, Xi'an Jiaotong-Liverpool University)
    Abstract: CFor several decades, the manufacturing industry has been the pillar industry in terms of economic growth in China. The importance of the manufacturing industry is also highlighted by the numerous policy interventions in favour of this industry. In this paper, we identify the key industrial sectors in terms of technical performances and technological advancements for the period 1999-2007. This represents particular valuable information in the context of policy implementations. The distinguishing features of our study are five-fold. One, we make used of a tailored firm-level database. Two, we distinguish between four types of firm ownership. Three, we consider 30 manufacturing sectors. Four, we extend a well-established methodology to answer our questions. Five, we rely on a robust nonparametric estimation method. Our results confirm that firm ownership is important in explaining technical efficiency and technology gap. We also show that foreign firms set the standard for technical efficiency, and are the leaders in terms of technology advancement; that private firms show technology advancements accompanied by eciency losses; and that China has successfully revitalized state-owned firms, although there is still room for improvement. Finally, we find evidence that China's industrial development plans have been successful in stimulating technology progress in many key sectors; but that the current policy of (re)nationalization may undermine technical efficiency and slow down technology progress.
    Keywords: technology gap; technical eciency; manufacturing industry; China; metafrontier; DEA.
    Date: 2018–04–01
  10. By: Baye, Irina; Reiz, Tim; Sapi, Geza
    Abstract: We focus on four important features of mobile targeting. First, consumers' real-time locations are known to sellers. Second, location is not the only factor determining how responsive consumers are to discounts. Other factors such as age, income and occupation play a role, which are imperfectly observable to marketers. Third, sellers may infer consumer responsiveness from their past purchases. Fourth, firms can deliver personalized offers to consumers through mobile devices based on both their real-time locations and previous purchase behavior. We derive conditions that determine how combining behavior-based marketing with mobile geo-targeting influences profits and welfare in a competitive environment. Our setting nests some earlier models of behavior-based price discrimination as special cases and yields additional insights. For instance, different from previous studies we show that pro.t and welfare effects of behavioral targeting may depend on firm discount factor.
    Keywords: Mobile Marketing,Location Targeting,Price Discrimination,Customer Data
    JEL: D43 L13 L15 M37
    Date: 2018
  11. By: Shinichi Kamiya; Jun-Koo Kang; Jungmin Kim; Andreas Milidonis; René M. Stulz
    Abstract: We examine which firms are targets of successful cyberattacks and how they are affected. We find that cyberattacks are more likely to occur at larger and more visible firms, more highly valued firms, firms with more intangible assets, and firms with less board attention to risk management. These attacks affect firms adversely when consumer financial information is appropriated, but seem to have little impact otherwise. Attacks where consumer financial information is appropriated are associated with a significant negative stock market reaction, an increase in leverage following greater debt issuance, a deterioration in credit ratings, and an increase in cash flow volatility. These attacks also affect sales growth adversely for large firms and firms in retail industries, and there is evidence that they decrease investment in the short run. Affected firms respond to such attacks by cutting the CEO’s bonus as a fraction of total compensation, by reducing the risk-taking incentives of management, and by taking actions to strengthen their risk management. The evidence is consistent with cyberattacks increasing boards’ assessment of target firm risk exposures and decreasing their risk appetite.
    JEL: G14 G32 G34 G35
    Date: 2018–03
  12. By: José-Antonio Espín-Sánchez (Cowles Foundation, Yale University); Álvaro Parra (Sauder School of Business)
    Abstract: We study market entry decisions when firms have private information about their profitability. We generalize current models by allowing general forms of market competition and heterogeneous firms that self-select when entering the market. Post-entry profits depend on market structure, and on the identities and the private information of the entering firms. We introduce a notion of the firm's strength and show that an equilibrium where players' strategies are ranked by strength, or herculean equilibrium, always exists. Moreover, when profits are elastic enough with respect to the firm's private information, the herculean equilibrium is the unique equilibrium of the game.
    Keywords: Entry, Oligopolistic markets, Private Information
    Date: 2018–04
  13. By: Alesssandro Danovi (University of Bergamo); Silvia Giacomelli (Bank of Italy); Patrizia Riva (University of Piemonte Orientale); Giacomo Rodano (Bank of Italy)
    Abstract: The paper provides a large set of new evidence about the workings of judicial composition with creditors (concordato preventivo) procedures based on a new dataset, specifically compiled, which constitutes the richest source of information currently available on the functioning of these procedures. Judicial composition with creditors is mainly used for the piecemeal liquidation of firms (about 70 per cent of the cases). Less than a quarter of judicial compositions with creditors fulfill the provisions of the plans. The recovery rate for secured loans is almost 100 per cent for all types of compositions, while for unsecured loans, recovery rates vary considerably: from 18 per cent in the case of piecemeal liquidation to 37 per cent in the case of restructuring (23 per cent for judicial composition with creditors that provides for the sale of the entire firm or of a branch). Regression analysis shows that better performance of judicial compositions with creditors is associated with a less chronic crisis at the time the judicial composition with creditors is initiated, measured as the time that passes between the earliest persistent difficulties faced by the firm in fulfilling its obligations to bank creditors and the initiation of the procedure.
    Keywords: bankruptcy law, firm restructuring, judicial composition with creditors
    JEL: G28 G33 K20
    Date: 2018–03
  14. By: Lutz, Stefan Heinz Hermann
    Abstract: Economic theory implies that research and development (R&D) efforts increase firm productivity and ultimately profits. In particular, R&D expenses lead to the development of intellectual property (IP) and IP commands a return that increases overall profits of the firm. This hypothesis is investigated for the North American automotive supplier industry by analyzing a panel of 5000 firms for the years 1950 to 2011. Results indicate that R&D expenses in fact increase profitability at the firm level. In particular, increases in the R&D expense to sales ratio lead to increases in the profit contribution of intangible assets relative to sales. This indicates that more R&D intensive IP should command higher royalty rates per sales when licensed to third parties and within multinational enterprises alike.
    Keywords: productivity,intellectual property,royalties,MNE,transfer pricing
    JEL: D24 L20 L62 M21
    Date: 2018
  15. By: Fabiano Schivardi (Università LUISS "Guido Carli"); Enrico Sette (Banca d'Italia); Guido Tabellini (Università Bocconi)
    Abstract: Do banks with low capital extend excessive credit to weak firms, and does this matter for aggregate eciency? Using a unique data set that covers almost all bank-firm relationships in Italy in the period 2008-2013, we find that, during the Eurozone financial crisis: (i) Under-capitalized banks cut credit to healthy firms (but not to zombie firms) and are more likely to prolong a credit relationship with a zombie firm, compared to stronger banks. (ii) In areas-sectors with more low-capital banks, zombie firms are more likely to survive and non-zombies are more likely to go bankrupt; (iii) Nevertheless, bank under-capitalization does not hurt the growth rate of healthy firms, while it allows zombie firms to grow faster. This goes against previous in uential findings that, we argue, face a serious identification problem. Thus, while banks with low capital can be an important source of aggregate ineffciency in the long run, their contribution to the severity of the great recession via capital misallocation was modest.
    Keywords: Bank capitalization, zombie lending, capital misallocation
    JEL: D23 E24 G21
    Date: 2018
  16. By: Méndez Ortega, Carles,; Teruel, Mercedes
    Abstract: The aim of this paper is to analyse the impact of Mergers and Acquisitions on firm growth for Software firms located in Catalonia. We investigate firms which are targeting, or are themselves the target of an acquisition and we find that the impact on is heterogeneous; there appear to be positive and negative impacts on productivity and sales growth rate. This paper contributes to the understanding of the M&A process in this young industry characterised by an exponential growth and how such activity interacts with the growth and productivity of the firms involved. Keywords: Software industry, Mergers and acquisitions, firm growth, Catalonia. JEL Codes: D22, C33, L86, O30
    Keywords: Conducta organitzacional, Programari -- Indústria i comerç, Empreses -- Creixement -- Catalunya, 33 - Economia,
    Date: 2018

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