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on Business Economics |
| By: | Ana Fontoura Gouveia; Christian Osterhold |
| Abstract: | Productivity growth is slowing down among OECD countries, coupled with increased misallocation of resources. A recent strand of literature focuses on the role of non-viable firms (“zombie firms”) to explain these developments. Using a rich firm-level dataset for one of the OECD countries with the largest drop in barriers to firm exit and restructure, we assess the role of zombies on firm dynamics, both in the extensive and intensive margins. We confirm the results on the high prevalence of zombie firms, significantly less productive than their healthy counterparts and thus dragging aggregate productivity down. Moreover, while we find evidence of positive selection within zombies, with the most productive restructuring and the least productive exiting, we also show that the zombies' productivity threshold for exit is much lower than that of nonzombies, allowing them to stay in the market, distorting competition and sinking resources. Zombie prevalence curbs the growth of viable firms, in particular the most productive, harming the intra-sectoral resource reallocation. We show that a reduction in exit and restructuring barriers promotes a more effective exit channel and fosters the restructuring of the most productive. These results highlight the role of public policy in addressing zombies' prevalence, fostering a more efficient resource allocation and enabling productivity growth. |
| Keywords: | Firm Dynamics, Insolvency Frameworks, Labor Productivity, Resource Allocation, Zombie Firms |
| JEL: | D24 E22 E24 G33 J24 L25 |
| Date: | 2018–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaac:13-en&r=bec |
| By: | Philipp Meinen; Horst Raff |
| Abstract: | Based on a theoretical model featuring heterogeneous retailers that may source globally and operate as chains, we derive a number of hypotheses that link trade integration to retail firm performance and to the structure of retail markets. We empirically test these predictions using Danish microdata for the period 1999 to 2008. We find that importing retailers are larger, more profitable, and have a higher propensity to have multiple shops than domestically sourcing firms. While this is partly due to self-selection, we also present evidence for improved perfor-mance caused by firms’ importing activities. Moreover, we find that retail imports are associated with a higher exit probability of small retailers and greater local retail market concentration. Overall, we obtain support for the model’s predictions and argue that the observed adjustments may imply additional gains from trade absent from models lacking a distribution sector. |
| Keywords: | international trade, consumer goods, retailing, retail chains, market concentration |
| JEL: | F12 L11 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7099&r=bec |
| By: | Jing Cai; Adam Szeidl |
| Abstract: | We organized business associations for the owner-managers of young Chinese firms to study the effect of business networks on firm performance. We randomized 2,820 firms into small groups whose managers held monthly meetings for one year, and into a “no-meetings” control group. We find that: (1) The meetings increased firm revenue by 8.1 percent, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score; (2) These effects persisted one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (4) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (5) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching. |
| Date: | 2017–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:ceu:econwp:2018_3&r=bec |
| By: | Chiara Criscuolo; Jonathan Timmis |
| Abstract: | This paper uses “centrality” metrics to reflect the changing structure of Global Value Chains (GVCs), contrasting central hubs and peripheral countries and sectors, and examine how these changes impact firm productivity. Using cross-country firm-level data from ORBIS, the paper finds that changing position within GVCs can play a role in the catch up of firms, but the results are heterogeneous across firms and countries. Firstly, becoming more central is associated with faster productivity growth of smaller firms, nonfrontier businesses, and of firms in smaller economies and in post-2004 EU member countries. And these correlations weaken with firm size and with proximity to the frontier, such that when one ignores firm heterogeneity and only considers average effects, there is no correlation for the average firms in the data. Secondly, the (centrality weighted) average productivity of buyers matters for the productivity of firms in our data overall, however this is particularly true for firms in large economies, for non-frontier and for smaller firms. The policy environment, such as flexible labour markets, better access to finance, stronger contract enforcement and simplified export procedures, appears to be important in translating the changing structure of GVCs into faster productivity growth of these non-frontier firms. |
| Keywords: | centrality, firms, global value chains, network analysis, Productivity |
| JEL: | D22 F12 F14 L25 |
| Date: | 2018–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaac:14-en&r=bec |
| By: | Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich |
| Abstract: | In this work we study the granular origins of business cycles and their possible underlying drivers. As shown by Gabaix (2011), the skewed nature of firm size distributions implies that idiosyncratic (and independent) firm-level shocks may account for a significant portion of aggregate volatility. Yet, we question the original view grounded on "supply granularity", as proxied by productivity growth shocks - in line with the Real Business Cycle framework-, and we provide empirical evidence of a "demand granularity", based on investment growth shocks instead. The role of demand in explaining aggregate fluctuations is further corroborated by means of a macroeconomic Agent-Based Model of the "Schumpeter meeting Keynes" family (Dosi et al., 2015). Indeed, the investigation of the possible microfoundation of RBC has led us to the identification of a sort of microfounded Keynesian multiplier. |
| Keywords: | business cycles, granular residual, granularity hypothesis, agent-based models, firm dynamics, productivity growth, investment growth |
| Date: | 2018–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2018/19&r=bec |
| By: | Michael Fritsch; Martin Obschonka; Michael Wyrwich |
| Abstract: | There is a research gap with respect to understanding the role of entrepreneurial culture and tradition for actual start-up behaviour. We combine historical self-employment data (entrepreneurial tradition) with a psycho- logical measure for entrepreneurial attitudes (entrepreneurial culture). The results reveal a positive relationship between the historical level of self- employment in a region and the presence of people with an entrepreneurial personality structure today. Our measure for a regional culture of entrepreneurship is positively related not only to the level of new business formation but also the amount of innovation activity. |
| Keywords: | Entrepreneurship, self-employment, new business formation, personality traits, culture, innovation |
| JEL: | L26 N94 O11 O30 R11 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1824&r=bec |
| By: | Kehoe, Patrick J. (Federal Reserve Bank of Minneapolis); Midrigan, Virgiliu (New York University); Pastorino, Elena (Federal Reserve Bank of Minneapolis) |
| Abstract: | Modern business cycle theory focuses on the study of dynamic stochastic general equilibrium models that generate aggregate fluctuations similar to those experienced by actual economies. We discuss how this theory has evolved from its roots in the early real business cycle models of the late 1970s through the turmoil of the Great Recession four decades later. We document the strikingly different pattern of comovements of macro aggregates during the Great Recession compared to other postwar recessions, especially the 1982 recession. We then show how two versions of the latest generation of real business cycle models can account, respectively, for the aggregate and the cross-regional fluctuations observed in the Great Recession in the United States. |
| Keywords: | New Keynesian models; Financial frictions; External validation |
| JEL: | E13 E32 E52 E61 |
| Date: | 2018–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:566&r=bec |
| By: | Engelbert Stockhammer (Kingston University); Rob Jump; Karsten Kohler; Julian Cavallero |
| Abstract: | Theories such as Minsky’s financial instability hypothesis or New Keynesian financial accelerator models assign a key role to financial factors in business cycle dynamics. We present descriptive statistics and a simple estimation framework to examine the financial-real interaction mechanisms that are at the core of these theories. Specifically, we examine cycle frequencies in seven OECD countries over the period 1970 to 2015, and find that interest rates, business debt, and household debt exhibit cycle lengths of 4-6, 8-11, and 14-26 years, respectively. We then estimate bivariate VAR models which provide evidence for financial-real interaction mechanisms, (i) at high frequencies between interest rates and GDP, and (ii) at low frequencies between business debt and GDP. In contrast, there is no evidence for a cycle mechanism between household debt and GDP. |
| Keywords: | Minsky, financial accelerator, financial cycle, business cycle |
| JEL: | E32 G01 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp1807&r=bec |
| By: | Michael Fritsch (FSU Jena); Michael Wyrwich (FSU Jena); Martin Obschonka (Queensland University of Technology Business School Brisbane) |
| Abstract: | There is a research gap with respect to understanding the role of entrepreneurial culture and tradition for actual start-up behaviour. We combine historical self-employment data (entrepreneurial tradition) with a psychological measure for entrepreneurial attitudes (entrepreneurial culture). The results reveal a positive relationship between the historical level of self-employment in a region and the presence of people with an entrepreneurial personality structure today. Our measure for a regional culture of entrepreneurship is positively related not only to the level of new business formation but also the amount of innovation activity. |
| Keywords: | Entrepreneurship, self-employment, new business for mation, personality traits, culture, innovation |
| JEL: | L26 N94 O11 O30 R11 |
| Date: | 2018–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2018-007&r=bec |
| By: | La Cour, Lisbeth; McGaughey, Sara; Raimondos, Pascalis |
| Abstract: | When searching for productivity spillovers from foreign firms, a firm is typically classified as foreign using a low threshold of direct foreign ownership. Instead, we advocate an `ultimate owner' definition because (i) ultimate ownership includes indirect ownership links that are prevalent in our complex, interdependent world; and (ii) it confers control. Control brings greater willingness to transfer knowledge to foreign affiliates but, paradoxically, also greater potential for spillovers. Adopting this alternate definition of what is foreign turns out to be pivotal for identifying spillovers: while we find no horizontal productivity effects using the low threshold direct ownership definition, we find positive and significant effects under the ultimate-owner definition. Moreover, we find evidence that indirectly controlled foreign firms exert the most persistent horizontal spillovers to domestic firms. |
| Keywords: | control vs influence; direct vs. ultimate owner; Foreign direct investment; indirect ownership links; productivity spillovers |
| JEL: | F23 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12978&r=bec |