nep-bec New Economics Papers
on Business Economics
Issue of 2018‒06‒11
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Impact of Exports on Innovation: Theory and Evidence By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz
  2. The Impact of Formal Networking on the Performance of SMEs By Davide Vannoni
  3. Is the U.S. Public Corporation in Trouble? By Kahle, Kathleen M.; Stulz, Rene M.
  4. Sales Performance and Social Preferences By Andrea Essl; Frauke von Bieberstein; Michael Kosfeld; Markus Kröll
  5. On Supply Function Equilibria in a Mixed Duopoly By Carlos, Gutiérrez-Hita; Vicente-Pérez, José
  6. The costs of trade protectionism: evidence from Spanish firms and non-tariff measures By Dmitri Kirpichev; Enrique Moral-Benito
  7. Cash, Financial Flexibility, and Product Prices: Evidence from a Natural Experiment in the Airline Industry By Kim, Sehoon
  8. Corporate Deleveraging By DeAngelo, Harry; Concalves, Andrei; Stulz, Rene M.
  9. Do personal data related innovation boost firm value? By Koski, Heli
  10. An Experimental Analysis of the Complications in Colluding when Firms are Asymmetric By Charles F. Mason
  11. Unbundling the Incumbent and Entry into Fiber: Evidence from France By Marc Bourreau; Lukasz Grzybowski; Maude Hasbi
  12. Outside Board Directors and Start-Up Firms’ Innovation By Baum, Christopher F; Lööf, Hans; Stephan, Andreas; Viklund-Ros, Ingrid
  13. Innovation and business performance for Spanish SMEs: new evidence from a multi-dimensional approach. By Alfonso Expósito; Juan A. Sanchis-Llopis

  1. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz
    Abstract: This paper investigates the effect of export shocks on innovation. On the one hand a positive shock increases market size and therefore innovation incentives for all firms. On the other hand it increases competition as more firms enter the export market. This in turn reduces profits and therefore innovation incentives particularly for firms with low productivity. Overall the positive impact of the export shock on innovation is magnified for high productivity firms, whereas it may negatively affect innovation in low productivity firms. We test this prediction with patent, customs and production data covering all French manufacturing firms. To address potential endogeneity issues, we construct firm-level export proxies which respond to aggregate conditions in a firm's export destinations but are exogenous to firm-level decisions. We show that patenting robustly increases more with export demand for initially more productive firms. This effect is reversed for the least productive firms as the negative competition effect dominates.
    JEL: D12 F13 F14 F41 O30 O47
    Date: 2018–05
  2. By: Davide Vannoni (Department of Economics and Statistics)
    Abstract: Using a large sample of Italian small and medium enterprises (SMEs), we investigate the effect of membership in a formal business network (?contratto di rete?) on firms? economic performance. We find that network participation has a positive effect on value added and exports, but not on profitability. The advantages of networking are stronger in the case of: smaller SMEs, firms operating in traditional and in more turbulent markets, firms located in less developed areas and firms not already exploiting the weaker ties offered by industrial districts. Network characteristics, such as size, geographical dispersion and diversity, are also found to influence performance.
    Keywords: formal business network, small and medium firms, economic performance
    JEL: D22 L25 M21
    Date: 2018–04
  3. By: Kahle, Kathleen M. (University of Arizona); Stulz, Rene M. (Ohio State University)
    Abstract: We examine the current state of the U.S. public corporation and how it has evolved over the last 40 years. After falling by 50 percent since its peak in 1997, the number of public corporations is now smaller than 40 years ago. These corporations are now much larger and over the last twenty years have become much older; they invest differently, as the average firm invests more in R&D than it spends on capital expenditures; and compared to the 1990s, the ratio of investment to assets is lower, especially for large firms. Public firms have record high cash holdings and, in most recent years, the average firm has more cash than long-term debt. Measuring profitability by the ratio of earnings to assets, the average firm is less profitable, but that is driven by smaller firms. Earnings of public firms have become more concentrated--the top 200 firms in profits earn as much as all public firms combined. Firms' total payouts to shareholders as a percent of earnings are at record levels. Possible explanations for the current state of the public corporation include a decrease in the net benefits of being a public company, changes in financial intermediation, technological change, globalization, and consolidation through mergers.
    JEL: D22 G24 G30
    Date: 2017–05
  4. By: Andrea Essl; Frauke von Bieberstein; Michael Kosfeld; Markus Kröll
    Abstract: We use an incentivized experimental game to uncover heterogeneity in other-regarding preferences among salespeople in a large Austrian retail chain. Our results show that the majority of agents take the welfare of others into account but a significant fraction reveals self-regarding behavior. Matching individual behavior in the game with firm data on sales performance shows that higher concern for others is significantly associated with higher revenue per customer. At the same time, it is also associated with fewer sales per day. Both effects offset each other, so that the overall association with total sales revenue becomes insignificant. Our findings highlight the nuanced role of self- vs. other-regarding concerns in sales contexts with important implications for management and marketing research.
    Keywords: other-regarding preferences, sales performance, experimental games
    JEL: C91 D91 M31
    Date: 2018
  5. By: Carlos, Gutiérrez-Hita (Departamento de Estudios Económicos y Financieros); Vicente-Pérez, José (Departamento Fundamentos Análisis Económico)
    Abstract: In this paper we present a mixed duopoly model of supply function competition under uncertainty with product differentiation. We find that, regardless the nature of product heterogeneity, the best response of the private firm always arises as strategic complement. Contrary to this, state-owned firm's best response arises either as strategic complement or substitute depending on the product heterogeneity. As a result of the ex post realization of the demand uncertainty, different equilibria are reached.
    Keywords: Supply Function Equilibria; Mixed oligopoly; Differentiated products
    JEL: D43 H42 L13
    Date: 2018–05–28
  6. By: Dmitri Kirpichev (CEMFI); Enrique Moral-Benito (Banco de España)
    Abstract: The rise in non-tariff protectionist measures has been associated to the weakness in global trade over the last few years. We investigate the effect of non-tariff barriers (NTBs) on exports growth over the period 2009-2013 using administrative data at the firm-product-destination level in Spain. According to our findings, non-tariff protectionist measures significantly reduce exports growth at the product-destination level. Moreover, NTBs also hinder exports growth at the firm level and negatively affect other firm outcomes such as productivity growth. In contrast, the impact of liberalizing non-tariff measures is not statistically significant.
    Keywords: protectionism, non-tariff measures, firm level data
    JEL: F10 F30 F40 G15 G21 G32
    Date: 2018–05
  7. By: Kim, Sehoon (University of Florida)
    Abstract: Corporate cash holdings impact firms' product pricing strategies. Exploiting the Aviation Investment and Reform Act of the 21st Century as a quasi-natural experiment to identify exogenous shocks to competition in the airline industry, I find that firms with more cash than their rivals respond to intensified competition by pricing more aggressively, especially when there is less concern of rival retaliation. Financially flexible firms based on alternative measures respond similarly. Moreover, cash-rich firms experience greater market share gains and long-term profitability growth. The results highlight the importance of strategic interdependencies across firms in the effective use of flexibility provided by cash.
    JEL: G30 G32 G35 L10
    Date: 2017–02
  8. By: DeAngelo, Harry (University of Southern California); Concalves, Andrei (Ohio State University); Stulz, Rene M. (Ohio State University)
    Abstract: Proactive deleveraging from all-time peak market leverage (ML) to near-zero ML and negative net debt is the norm among 4,476 nonfinancial firms with five or more years of post-peak data. ML is 0.543 at the historical peak and 0.026 at the later trough for the median firm in this sample, with a six-year median time from peak to trough. These deleveraging episodes are largely proactive, with debt repayment and earnings retention accounting for 93.7% of the peak-to-trough decline in ML for the median firm. Attenuated deleveraging, with ML staying well above zero, is the norm at 3,118 firms that are delisted due to financial distress within four years of peak. Leverage is path dependent, with the key to explaining whether ML is high or low at the post-peak trough being how high it was at the peak and prior trough and whether the firm has had only a short time to deleverage, e.g., due to distress-related delisting. The findings are consistent with proactive deleveraging to avoid distress and to restore financial flexibility, and are hard to reconcile with materially positive target leverage ratios.
    JEL: G31 G33 G35
    Date: 2016–11
  9. By: Koski, Heli
    Abstract: Personal data is increasingly used in business value creation. Data from the years 2007–2014 suggest that firms’ personal data related innovations and knowledge stocks in technology domains of location-based services and artificial intelligence contributed substantially to firm value. The premiums gained from personal data related innovation were particularly significant for data giants holding knowledge stocks in the location-based service domain. Empirical findings indicate that a strong positive relationship between personal data related knowledge stocks of the location-based services domain and firm value relates primarily to investor attention intensified during periods of media hype. The data provide new insights into the market valuation of intangible assets: investors seem to overweight more salient right tails of firms’ knowledge stocks of emerging technologies while neglecting salient left tails.
    Keywords: Firm value, data economy, personal data, innovation, investor attention, technology salience
    JEL: D22 L2 O3
    Date: 2018–05–25
  10. By: Charles F. Mason
    Abstract: I study an indefinitely repeated game where firms differ in size. Attempts to form cartels in such an environment, for example by rationing outputs in a manner linked to firm size differences, have generally struggled. Any successful cartel has to set production shares in a manner that ensures no firm will defect. But this can require allocating sellers disproportionate shares, which in turn makes these tacit agreements difficult to create and enforce. I analyze some experimental evidence in support of this last proposition.
    Keywords: asymmetric cartel, repeated game, experiments
    JEL: D80 L15
    Date: 2018
  11. By: Marc Bourreau; Lukasz Grzybowski; Maude Hasbi
    Abstract: We use panel data on 36,104 municipalities in metropolitan France over the period 2010-2014 to estimate two models of entry into local markets by: (i) alternative operators using wholesale access to the legacy copper network via local loop unbundling (LLU), and (ii) the incumbent and two alternative operators using the fiber technology. We find that a higher number of LLU competitors, and hence a less concentrated local market, has a positive impact on entry by fiber operators. Moreover, the presence of upgraded cable network in the local municipality stimulates fiber deployment. However, firms may choose to upgrade copper lines instead of investing in fiber networks. We use the estimates to calculate entry thresholds into local markets, which are substantially lower for broadband provision via LLU than via fiber and decrease over time. Fiber deployment becomes cheaper over time, but according to our estimates it will remain unprofitable for the vast majority of municipalities in France within the next years.
    Keywords: fiber broadband, local loop unbundling, market entry
    JEL: K23 L13 L51 L96
    Date: 2018
  12. By: Baum, Christopher F (Boston College and DIW Berlin); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stephan, Andreas (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS)); Viklund-Ros, Ingrid (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: We exploit increased access to detailed employer-employee data to assess whether outside board members affect innovation performance among start-up firms. Using data for all new limited companies in Sweden born during 1999–2013 which have no more then 10 employees when formed, we provide structural equation estimates that deal with the endogenous selection of board directors. Our empirical findings show that an increase in the board’s expertise, measured by the relative productivity of the firms where outsiders are employed, has a significant and positive impact on the new firm’s propensity to apply for both patents and trademarks.
    Keywords: Start-ups; outside directors; innovation; patents; trademarks; productivity; endogeneity
    JEL: D24 O33
    Date: 2018–06–01
  13. By: Alfonso Expósito (Department of Economic Analysis and Political Economy, University of Seville, Calle San Fernando 4, 41004 Sevilla (Spain).); Juan A. Sanchis-Llopis (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).)
    Abstract: This paper examines the impacts of product, process, and organisational innovations on two alternative dimensions of business performance: finance and operations. Two indicators capture financial performance: sales increase and production cost reduction. Operational firm performance is captured by two alternative indicators: productive capacity augmentation and quality improvement of product/service provided by the firm. Using a wide-ranging sample of Spanish SMEs, our findings highlight the existence of significant impacts of innovation on both these dimensions of business performance, although these impacts differ regarding the type of innovation and the performance indicator considered. Furthermore, our results indicate that the relationship between innovation choices in SMEs and business performance should be analysed from a multidimensional approach. These findings reveal significant implications for innovation policies and innovation strategies for SMEs.
    Keywords: innovation, business performance, multi-dimensional analysis, SME, Spain
    JEL: O32 L25 C25
    Date: 2018–05

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