nep-bec New Economics Papers
on Business Economics
Issue of 2018‒10‒08
eight papers chosen by
Vasileios Bougioukos
Bangor University

  1. Nowhere Else to Go: The Determinants of Bank-Firm Relationship Discontinuations after Bank Mergers By Oliver Rehbein; Santiago Carbo-Valverde
  2. Social Networks and Entrepreneurship. Evidence from a Historical Episode of Industrialization By Javier Mejia
  3. Innovation Capital By Audretsch, David; Link, Albert
  4. Fighting alone or fighting for a team: Evidence from experimental pairwise contests By Lingbo Huang; Zarah Murad
  5. Where do investor relations matter the most? By Brochet, Francois; Limbach, Peter; Bazhutov, Dmitry; Betzer, André; Doumet, Markus
  6. Insider Trading and Networked Directors By Goergen, M.; Renneboog, Luc; Zhao, Y.
  7. Mark-up Volatility in Food Value Chains: Evidence from France and Italy By Maria Garrone; Johan Swinnen
  8. Actor Fluidity and Knowledge Persistence in Regional Inventor Networks By Michael Fritsch; Moritz Zöllner

  1. By: Oliver Rehbein; Santiago Carbo-Valverde
    Abstract: The decision to change or terminate a bank-firm relationship has been demonstrated to be crucial for firm performance following bank mergers. We find both competition and the available firm collateral to be important factors in enabling firms to switching banks, instead of dropping their bank relationships. We also provide novel evidence that firms who are able to \textit{add} a bank relationship following a merger exhibit much stronger post-merger performance. Our findings are consistent with the interpretation that bank-mergers cause a reduction in lending to most firms, leading them to search for alternative sources of finance.
    Keywords: bank mergers, relationship banking, competition
    JEL: G21 G34
    Date: 2018–09
  2. By: Javier Mejia (Division of Social Science)
    Abstract: This paper explores the relationship between social networks and entrepreneurship by constructing a dynamic social network from archival records. The network corresponds to the elite of a society in transition to modernity, characterized by difficult geographical conditions, market failures, and weak state capacity, as in late 19th- and early 20th-century Antioquia (Colombia). With these data, I estimate how the decision to found industrial firms related to the position of individuals in the social network. I find that individuals more important bridging the network (i.e. with higher betweenness centrality) were more involved in industrial entrepreneurship. However, I do not find individuals with a denser network to be more involved in this type of activity. The rationale of these results is that industrial entrepreneurship was a highly-complex activity that required a wide variety of complementary resources. Networks operated as substitutes for markets in the acquisition of these resources. Thus, individuals with network positions that favored the combination of a broad set of resources had a comparative advantage in industrial entrepreneurship. I run several tests to prove this rationale.
    Date: 2018–09
  3. By: Audretsch, David (Indiana University); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: In this paper we compare the relationship between a firm’s innovation capital and the likelihood that a firm will commercialize an invention. Our index of innovation capital is the product of the firm’s human capital, social capital, and reputational capital. We find from our empirical experiment, which uses Small Business Innovation Research (SBIR) data, that innovation capital is a statistically more important entrepreneurial input to the innovation output of commercialization than any of its components.
    Keywords: innovation capital; human capital; social capital; reputational capital; entrepreneurship; commercialization;
    JEL: L31 O31 O38
    Date: 2018–09–21
  4. By: Lingbo Huang (Monash University); Zarah Murad (University of Portsmouth)
    Abstract: People who compete alone may entertain different psychological motivations from those who compete for a team. Using a real-effort experiment, we examine the behavioural consequences of these psychological motivations, absent strategic interdependence and uncertainty among team members. We exploit a dynamic pairwise team contest in which strategic uncertainties among team members play a minimised role in individual rational behaviour; and we create strategically-equivalent individual contests to isolate the pure psychological effects of team situation on individual competitive behaviour. We find that behaviour in individual contests and in sterile team contests follows a psychological momentum effect in which leaders work harder than trailers. In contrast, in team contests enriched with intra-team communication, behaviour follows a neutral effect. We discuss the implications of our results for theoretical modelling of contests and practical implications for the optimal design of team incentive schemes and personnel management.
    Keywords: individual versus team behaviour, real-effort experiment, pairwise team contest, best-of-three team contest, communication, psychological momentum effect
    JEL: C33 C72 D79 C91 C92
    Date: 2018–09–19
  5. By: Brochet, Francois; Limbach, Peter; Bazhutov, Dmitry; Betzer, André; Doumet, Markus
    Abstract: We test the hypothesis that the marginal benefit of investment in investor relations (IR) is greater in countries where capital market institutions are generally less developed and tailored to a more concentrated ownership structure. We use a large panel of survey-based annual IR rankings of German and U.K. companies to study the marginal benefits of IR using within-firm variation. We find that IR quality in Germany exhibits a positive association with capital market visibility, liquidity, and firm value and a negative one with information asymmetry and uncertainty as well as cost of equity capital - and significantly more so than in the U.K. In a broader European sample, we find that the benefits of IR accrue more significantly to firms located in countries where i) corporate ownership is more concentrated and ii) capital market institutions are weaker. Overall, the evidence suggests that IR provides greater marginal benefits in markets where demand for this type of shareholder communication has been historically lower.
    Keywords: Investor Relations,Transparency,Ownership Concentration,Firm Visibility,Information Asymmetry,Cost of Capital
    Date: 2018
  6. By: Goergen, M.; Renneboog, Luc (Tilburg University, Center For Economic Research); Zhao, Y.
    Abstract: We analyze the relation between insider trading and the networks of executive and non-executive directors in UK listed companies. While most existing studies focus on firm-specific private information, we find that non-firm-specific information - such as information on other companies and information on industry and market trends - plays an important role in insider trading behavior and performance. Well-connected directors trade shares less frequently and for smaller values. However, their transactions are more profitable, especially when they make consecutive opportunistic purchases in multiple companies on whose boards they sit. Taken together, well-connected directors are likely to outperform their peers with inferior networks.
    Keywords: insider trading; director networks; network analysis; centrality; opoortunistic trading; routine trading
    JEL: G14 G34 G39
    Date: 2018
  7. By: Maria Garrone; Johan Swinnen
    Abstract: This paper estimates firm-level mark-ups and their volatility along the agri-food value chain using the methodology of De Loecker and Warzynski (2012). We estimate mark-ups of farmers, processors, wholesalers and retailers, how they change over time, and their volatility. We use detailed micro-level data from companies from Italy and France for the period 2006-2014. We find that farmers have a significantly higher volatility of mark-ups than other agents in the agri-food value chain, such as food processors, wholesalers and retailers. The volatility is negatively related with firms size in all sectors, and especially in agriculture.
    Date: 2018
  8. By: Michael Fritsch (FSU Jena, School of Economics and Business Administration); Moritz Zöllner (FSU Jena, School of Economics and Business Administration)
    Abstract: The development of inventor networks is characterized by the addition of a significant number of new inventors, while a considerable number of incumbent inventors discontinue. We estimate the persistence of knowledge in regional inventor networks using alternative assumptions about knowledge transfer. Based on these estimates we analyze how the size and structure of a network may influence knowledge persistence over time. In a final step, we assess how persistent knowledge as well as the knowledge of new inventors effect the performance of regional innovation systems (RIS). The results suggest that the knowledge of new inventors is much more important for RIS performance than old knowledge that persists.
    Keywords: Innovation networks, knowledge, RandD cooperation, patents, persistence
    JEL: O3 R1 D2 D8
    Date: 2018–09–26

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