nep-bec New Economics Papers
on Business Economics
Issue of 2018‒12‒10
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Entrepreneurial Human Capital and Firm Dynamics By Francisco Queiró
  2. Firm survival during economic downturns: Cleansing vs. strategy-based selection By A. Arrighetti; F. Landini; E. Bartoloni
  3. Accounting for Firm Heterogeneity within U.S. Industries: Extended Supply-Use Tables and Trade in Value Added using Enterprise and Establishment Level Data By James J. Fetzer; Tina Highfill; Kassu W. Hossiso; Thomas F. Howells, III; Erich H. Strassner; Jeffrey A. Young
  4. On bundling and entry deterrence By Andrea Greppi; Domenico Menicucci
  5. Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis By Kalemli-Ozcan, Sebnem
  6. Minority share acquisitions and collusion: evidence from the introduction of national leniency programs By Heim, Sven; Hueschelrath, Kai; Laitenberger, Ulrich; Spiegel, Yossi
  7. Environmental Pollution Policy of Small Businesses in Nigeria and Ghana: Extent and Impact By Uchenna Efobi; Tanankem Belmondo; Emmanuel Orkoh; Scholastica Ngozi Atata; Opeyemi Akinyemi; Ibukun Beecroft
  8. Leverage over the Life Cycle and Implications for Firm Growth and Shock Responsiveness By Kalemli-Ozcan, Sebnem
  9. On the U.S. Firm and Establishment Size Distributions By Illenin O. Kondo; Logan T. Lewis; Andrea Stella
  10. Credit Rationing in European SMEs and their Lending Infrastructure By Andrea Mc Namara; Pierluigi Murro

  1. By: Francisco Queiró (Nova School of Business and Economics)
    Abstract: This paper shows that entrepreneurial human capital is a key driver of firm dynamics using administrative panel data on the universe of firms and workers in Portugal. Firms started by more educated entrepreneurs are larger at entry and exhibit higher growth throughout the life cycle. The differences are driven by productivity, are particularly strong in the upper tail of the distribution, and do not hold for more educated workers in general. In addition, they do not appear to be driven by omitted ability or selection. Combining these findings with cross-country data to calibrate a simple model of heterogeneous firms, I find that accounting for the effect of entrepreneurial human capital on firm-level productivity increases the fraction of cross-country income differences explained by human and physical capital from 40% to 65%-76%.
    Keywords: Entrepreneurship; Human Capital; Firm Dynamics; Productivity
    JEL: I2 L2 O4
    Date: 2018–12
  2. By: A. Arrighetti; F. Landini; E. Bartoloni
    Abstract: Recessions are complex events that create perturbed and hostile business environments. When faced with such event, firm survival depends only limitedly on production efficiency. Rather, it depends on the ability to cope with such complexity, which is itself a result of the firm’s corporate strategy. In particular, we expect firms adopting a corporate strategy that make relatively large (little) use of skills and capabilities to deal with environmental complexity to be less (more) likely to exit during a downturn than firms that do not. We test these hypotheses on the whole population of Italian manufacturing corporations using an open panel that covers the period 2001-2014. The results provide strong support for our hypotheses. Managerial and policy implications are discussed.
    Keywords: firm survival; corporate strategy; efficiency, recession; cleanisng
    JEL: D24 L11 L25
    Date: 2018
  3. By: James J. Fetzer; Tina Highfill; Kassu W. Hossiso; Thomas F. Howells, III; Erich H. Strassner; Jeffrey A. Young
    Abstract: This paper presents experimental tables created by the U.S. Bureau of Economic Analysis comparing industry-specific shares of the components of total output of globally engaged firms located in the United States that are part of a multinational enterprise with those of firms that are part of an enterprise entirely located in the United States. Recent research has shown both the importance of accounting for trade in value added when estimating bilateral trade flows and that multinational enterprises located in the United States account for the lion’s share of U.S. trade in goods and services. However, trade in value added is typically accounted for using input-output tables that are aggregated across all types of firms. The experimental tables are consistent with other research showing that value added as a share of output is lower for foreign-owned firms compared with domestic-owned firms and that exports and imports as a share of output is larger for foreign-owned firms. We also find heterogeneity in the composition of output among different types of domestic-owned firms. Future work will analyze this heterogeneity in more detail using establishment-level data on production and trade.
    JEL: D57 F23
    Date: 2018–11
  4. By: Andrea Greppi; Domenico Menicucci
    Abstract: A multiproduct dominant firm faces the threat of entry from another multiproduct firm or from single-product firms. We inquire whether the possibility of bundling by the dominant firm is more effective in deterring entry in one setting or the other. We extend the analysis of a model in Hurkens et al. (2018) to explore how the dominance level affects the comparison. For instance, for intermediate dominance levels an integrated firm is more vulnerable to bundling than separate firms, but bundling is a credible action for the dominant firm more often when it faces separate rivals than an integrated rival.
    Keywords: Competitive Bundling, Entry deterrence.
    JEL: D43 L13 L41
    Date: 2018
  5. By: Kalemli-Ozcan, Sebnem
    Abstract: We quantify the role of financial factors behind the sluggish post-crisis performance of European firms. We use a firm-bank-sovereign matched database to identify separate roles for firm and bank balance sheet weaknesses arising from changes in sovereign risk and aggregate demand conditions. We find that firms with higher debt levels and a higher share of short-term debt reduce their investment more after the crisis. This negative effect is stronger for firms linked to weak banks with exposures to sovereign risk, signifying increased rollover risk. These financial channels explain about 60% of the decline in aggregate corporate investment.
    Keywords: Bank-Sovereign Nexus; debt maturity; Firm Investment; Rollover Risk
    JEL: E0 F0
    Date: 2018–11
  6. By: Heim, Sven; Hueschelrath, Kai; Laitenberger, Ulrich; Spiegel, Yossi
    Abstract: There is a growing concern that minority shareholding (MS) in rival firms may facilitate collusion. To examine this concern, we exploit the fact that leniency programs (LPs) are generally recognized as a shock that destabilizes collusive agreements and study the effect that the introduction of an LP has on horizontal MS acquisitions. Using data from 63 countries over the period 1990-2013, we find a large increase in horizontal MS acquisitions in the year in which an LP is introduced, especially in large rivals. The effect is present however only in countries with an effective antitrust enforcement and low levels of corruption and only when the acquisitions involve stakes of 10% - 20%. These results suggest that MS acquisitions may stabilize collusive agreements that were destabilized by the introduction of the LP.
    Keywords: cartel stability; Collusion; Leniency Programs; minority shareholdings
    JEL: G34 K21 L4
    Date: 2018–11
  7. By: Uchenna Efobi (Covenant University, Ota, Ogun State, Nigeria); Tanankem Belmondo (MINEPAT, Yaoundé, Cameroon); Emmanuel Orkoh (World Trade Organization, Geneva); Scholastica Ngozi Atata (Abeokuta, Nigeria); Opeyemi Akinyemi (Covenant University, Ota, Ogun State, Nigeria); Ibukun Beecroft (Covenant University, Ota, Ogun State, Nigeria)
    Abstract: This study provides a comprehensive assessment of firms’ operation and environmental protection polices in Nigeria and Ghana, where there has been a rising industrial growth amidst low regulatory and institutional frameworks. We analyze the extents to which firms’ adoption of environmental protection policies affect their performances. We use firm-level data of 842 firms (447 for Nigeria and 395 for Ghana) distributed across different regions of both countries for our descriptive and econometric estimations. We find, among other things, that firms’ adoption of internal policies on environmental protection is dismally low in both Nigeria (32 percent) and Ghana (17 percent), with policies focused on reducing solid (38 percent, Nigeria; and 35 percent, Ghana), gaseous (22 percent, Nigeria; and 44 percent, Ghana), and liquid (24 percent, Nigeria; and 14 percent, Ghana) pollution. Training appears to be an important intervention that can help improve firms’ adoption of such policies. We also found that firms’ adoption and implementation of environmental protection policies significantly improve their performance.
    Keywords: Environment; Green Industrialization; Performance; Pollution; Small Businesses; West Africa
    JEL: H32 L25 Q52 Q53
    Date: 2018–01
  8. By: Kalemli-Ozcan, Sebnem
    Abstract: We study the leverage of U.S. firms over their life-cycle and implications for firm growth and responses to shocks. We use a new dataset that matches private firms' balance sheets to U.S. Census Bureau's Longitudinal Business Database (LBD) for the period 2005-2012. A number of stylized facts emerge. First, firm size and leverage are strongly positively correlated for private firms, both in the cross section of firms and over time for a given firm. For public firms, there is a weak negative relation between leverage and size. Second, young private firms borrow more, but firm age has no relation to public firms' leverage. Third, while private firms switch from debt to equity financing as they age, public firms slightly reduce equity financing as they age. Building on this "normal times" benchmark and using the "Great Recession" as a shock to financial conditions, we show that, for private firms, firm size can serve as a good predictor of financial constraints. During the Great Recession, leverage declines for private firms, but not for public firms. We also provide evidence that private firms' growth is positively related to leverage, as they finance their growth during normal times with short-term borrowing, whereas the relationship between leverage and firm growth is negative for public firms. These results suggest that public firms are not financially constrained during normal times or during crisis, but private firms are.
    Keywords: age; census data; Financial constraints; firm life-cycle; leverage; Short-term debt
    JEL: E0
    Date: 2018–11
  9. By: Illenin O. Kondo; Logan T. Lewis; Andrea Stella
    Abstract: This paper revisits the empirical evidence on the nature of firm and establishment size distributions in the United States using the Longitudinal Business Database (LBD), a confidential Census Bureau panel of all non-farm private firms and establishments with at least one employee. We establish five stylized facts that are relevant for the extent of granularity and the nature of growth in the U.S. economy: (1) with an estimated shape parameter significantly below 1, the best-fitting Pareto distribution substantially differs from Zipf's law for both firms and establishments; (2) a lognormal distribution fits both establishment and firm size distributions better than the commonly-used Pareto distribution, even far in the upper tail; (3) a convolution of lognormal and Pareto distributions fits both size distributions better than lognormal alone while also providing a better fit for the employment share distribution; (4) the estimated parameters are different across manufa cturing and services sectors, but the distribution fit ranking remains unchanged in the sectoral subsamples. Finally, using the Census of Manufactures (CM), we find that (5) the distribution of establishment-level total factor productivity---a common theoretical primitive for size---is also better described by lognormal than Pareto. We show that correctly characterizing the firm size distribution has first order implications for the effect of firm-level idiosyncratic shocks on aggregate activity.
    Keywords: Firm size distribution ; Granularity ; Lognormal ; Pareto ; TFP distribution ; Zipf's law
    JEL: L11 E24
    Date: 2018–11–14
  10. By: Andrea Mc Namara (National University of Ireland); Pierluigi Murro (LUISS University Author-Name: Sheila O'Donohoe; Waterford Institute of Technology)
    Abstract: We examine the influence of countries lending infrastructure on credit rationing for European SMEs. This lending infrastructure is comprised of countries information, legal, judicial, bankruptcy, social and regulatory environments. Using a sample of 13,957 SMEs from eleven European countries, we find that SMEs in countries in which there is greater information sharing, fewer legal rights, a more efficient judicial system and less efficient bankruptcy system are less likely to be credit rationed. Moreover, an efficient bankruptcy regime is more important for larger and more risky firms in reducing the likehood of they being credit rationed. Equally the impact of banks regulatory regime varies across firm riskiness; a stricter regime results in a greater likehood of credit rationing for more risky or finally weaker firms in contrast to stronger firms where less regulation sees more rationing.
    Keywords: SMEs, Lending Infrastracture, Credit Constraints.
    JEL: G20 G28
    Date: 2018

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