nep-bec New Economics Papers
on Business Economics
Issue of 2018‒07‒23
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. The impact of management practices on SME performance By John Forth; Alex Bryson
  2. The sources of heterogeneity in firm performance: Lessons from Italy By A. Arrighetti; F. Landini; E. Bartoloni
  3. International trade and retail market performance and structure: Theory and empirical evidence By Meinen, Philipp; Raff, Horst
  4. How Importers May Hedge Demand Uncertainty By Horst Raff; Nicolas Schmitt; Frank Stähler
  5. What do you say and how do you say it: Information disclosure in Latin American firms By Diego Téllez; Maximiliano González; Alexander Guzmán; María Andrea Trujillo
  6. Bidding against the odds? The impact evaluation of grants for young micro and small firms during the recession By Stjepan Srhoj; Bruno Skrinjaric; Sonja Radas
  7. Specialization matters in the firm size-wage gap By Molina-Domene, Maria
  8. Networks and trade By Bernard, Andrew B.; Moxnes, Andreas
  9. Endogenous Timing in a Price-Setting Mixed Oligopoly By Haraguchi, Junichi; Hirose, Kosuke
  10. Experimental Estimates of Wages and Gross Output by Business Size and Industry, 2002–2012 By Tina Highfill; Erich Strassner; Tom Howells

  1. By: John Forth (National Institute of Social and Economic Research); Alex Bryson (University College London, National Institute of Social and Economic Research and Institute for the Study of Labor)
    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: 2018–05–01
  2. By: A. Arrighetti; F. Landini; E. Bartoloni
    Abstract: An extensive literature documents large and persistent within-industry heterogeneity of firm performance. While some authors explain such evidence in terms of factor misallocation, we provide an alternative framework that is based on the interaction among exogenous and endogenous factors. Exogenous factors, both supply and demand-related, define the opportunity set that is available to firms. Endogenous factors reflect instead firm-specific interpretations of such set, which combined with the available resources and capabilities determine firm’s strategic responses that can be markedly heterogeneous. Whenever the diversity of firm conducts is associated with relatively small profit differentials, firm heterogeneity can persist. Evidence based on the evolution of labour productivity and profit dispersion in the Italian manufacturing sector between the 1990s and early 2000s provides support for our interpretative framework.
    Keywords: Firm heterogeneity; productivity; profit; misallocation; capabilities; Italy
    JEL: D24 L11 L25
    Date: 2018
  3. By: Meinen, Philipp; Raff, Horst
    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 performance 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
    JEL: F12 L11
    Date: 2018
  4. By: Horst Raff (University of Kiel); Nicolas Schmitt (Simon Fraser University); Frank Stähler (University of Tübingen, University of Adelaide, CESifo and NoCeT)
    Abstract: This paper examines how firms deal with demand uncertainty when importing intermediate goods takes time, and orders have to be placed before the realization of demand is known. We consider two strategies to hedge this uncertainty: building up inventory of imported goods, and relying on more expensive domestic supplies to cover peak demand. Which strategy is optimal depends on the price of imported relative to domestic goods, and on the degree of demand uncertainty. We also show that there are relative import prices and degrees of demand uncertainty for which the firm chooses not to hedge uncertainty and may thus stock out. The optimal hedging strategy implies a non-monotonic relationship between firm-level output volatility and the relative import price.
    Keywords: International trade, dual sourcing, inventory, demand uncertainty, rm-level output volatility
    JEL: F12 L81
    Date: 2018–07
  5. By: Diego Téllez; Maximiliano González; Alexander Guzmán; María Andrea Trujillo
    Abstract: Firms in Latin America could differentiate themselves by adopting better information disclosure practices. In this paper, we construct an Information Disclosure Index (IDI) for a sample of 454 firms in the six largest Latin America countries. We look at 3.191 company reports and show that firms with better disclosure practices have better market valuation (Tobin’s Q) and operating performance (ROE). We then measure the tone of the information disclosed using word content analysis, and find that uncertainty in tone is negatively associated with higher firm valuation (Tobin’s Q) and better financial performance (ROE).
    Keywords: Disclosure Content analysis Corporate governance Firm value
    JEL: G15 G34
    Date: 2017–02–25
  6. By: Stjepan Srhoj (Department for Economics and Business Economics, University of Dubrovnik); Bruno Skrinjaric (The Institute of Economics, Zagreb); Sonja Radas (The Institute of Economics, Zagreb)
    Abstract: Impact evaluations of entrepreneurship policies targeting young firms have been somewhat neglected thus far in the literature. This paper seeks to contribute to this topic in the context of a long recession period, such as the one experienced in Croatia from 2009 to 2014. These policies awarded small grant amounts for activities such as business plan development, consultancy, marketing and office renovation. Awarding small grant amounts to many firms might be tempting for politicians, but is this political populism or smart policy? This paper estimates the impact of matching grants for business development on three types of outcomes: bank loans, firm survival and firm performance. The full firm-level census dataset was supplemented with entrepreneur-level court register and firm-level data on grant recipients. Policy evaluation was performed using matching techniques with a combination of nearest neighbor and exact matching, and robustness of results was tested using a placebo test and Rosenbaum bounds. The results show that grants had a positive impact on firm survival after the recession, and on obtaining long-term bank loans during the recession. However, no empirical support was found for the grants’ impact on growth in turnover, employment and labor productivity.
    Keywords: grants, recession, young firms, survival, firm performance, bank loans
    JEL: H25
    Date: 2018–05
  7. By: Molina-Domene, Maria
    Abstract: This study applies the O-ring theory to explain the firm-size wage premium. It focuses on the joint role of the division of labor and employee characteristics. Including the firm heterogeneity of occupations in a standard wage regression with individual fixed effect shrinks the size coefficient by a third. Labor productivity follows a similar pattern as wages. The intuition is that individuals who work for large firms focus on a limited number of tasks become more efficient and productive, and earn higher wages. Additional predictions originating from the labor specialization hypothesis receive support from the data.
    Keywords: firm size-wage gap; specialization; division of labor
    JEL: J31 L23
    Date: 2018–05–01
  8. By: Bernard, Andrew B.; Moxnes, Andreas
    Abstract: Trade occurs between firms both across borders and within countries, and the vast majority of trade transactions includes at least one large firm with many trading partners. This paper reviews the literature on firm-to-firm connections in trade. A growing body of evidence coming from domestic and international transaction data has established empirical regularities which have inspired the development of new theories emphasizing firm heterogeneity among both buyers and suppliers in production networks. Theoretical work has considered both static and dynamic matching environments in a framework of many-to-many matching. The literature on trade and production networks is at an early stage, and there are a large number of unanswered empirical and theoretical questions.
    Keywords: international trade; production networks; offshoring; productivity
    JEL: F10 F12 F14 L11 L21
    Date: 2018–04–01
  9. By: Haraguchi, Junichi; Hirose, Kosuke
    Abstract: We investigate the endogenous order of moves in a price-setting mixed oligopoly model, comprising two private firms and a public firm. We show that sequential moves emerge as the equilibrium in the observable delay game. Specifically, one of the private firms and the public firm set their prices in period 1, and the other private firm does so in period 2, in equilibrium, if their goods are not significantly differentiated. This is a clear contrast to a mixed duopoly where a simultaneous move game is a unique equilibrium. We also discuss a number of extensions and the robustness of our result.
    Keywords: Mixed Markets; Endogenous Timing; Stackelberg
    JEL: H44 L13
    Date: 2018–06–12
  10. By: Tina Highfill; Erich Strassner; Tom Howells (Bureau of Economic Analysis)
    Date: 2018–06

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