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on Business Economics |
| By: | Philippe Aghion; Antonin Bergeaud; Gilbert Cette; Rémy Lecat; Hélène Maghin |
| Abstract: | In this paper we identify two counteracting effects of credit access on productivity growth: on the one hand, better access to credit makes it easier for entrepreneurs to innovate; on the other hand, better credit access allows less efficient incumbent firms to remain longer on the market, thereby discouraging entry of new and potentially more efficient innovators. We first develop a simple model of firm dynamics and innovation-base growth with credit constraints, where the above two counteracting effects generate an inverted-U relationship between credit access and productivity growth. Then we test our theory on a comprehensive French manufacturing firm-level dataset. We first show evidence of an inverted-U relationship between credit constraints and productivity growth when we aggregate our data at sectoral level. We then move to firm-level analysis, and show that incumbent firms with easier access to credit experience higher productivity growth, but that they also experienced lower exit rates, particularly the least productive firms among them. To confirm our results, we exploit the 2012 Eurosystem's Additional Credit Claims (ACC) program as a quasi-experiment that generated exogenous extra supply of credits for a subset of incumbent firms. |
| Keywords: | inverted-u relationship, credit, eurosystem |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1588&r=all |
| By: | Feng, Xunan (Shanghai University of Finance and Economics); Johansson , Anders C. (Stockholm China Economic Research Institute); Wang, Ying (Peking University) |
| Abstract: | We examine the nationalization of listed firms in China. Using a manually collected data set of 115 cases of ownership transfer from private to state control, we find that nationalization is positively associated with firm performance. When we analyze potential mechanisms through which nationalization may affect firm performance, we find a positive effect on benefits in the form of market power, government subsidies and bank financing. We also identify significant costs in the form of a higher tax burden, higher employment costs, and higher levels of corporate donations following nationalization. Finally, we show that weak local institutions exacerbate the influence nationalization has on firm performance and the benefits and costs tied to a shift to state control. These findings shed light on the effects when the government actively takes a more prominent role in the economy by becoming a controlling shareholder in large companies. |
| Keywords: | Nationalization; Political economy; Firm performance; Local institutions; China |
| JEL: | G32 G34 H11 P26 P31 |
| Date: | 2018–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2018-051&r=all |
| By: | Sokolov, D.; Zavyalova, E. |
| Abstract: | In this paper, we examine the moderating role of knowledge management strategies of codification and personalization in "HRM – intellectual capital – firm performance" relationship. A survey data from 209 knowledge-intensive companies from Russia demonstrated that knowledge management strategy significantly alters the relationship between company’s HRM practices, intellectual capital and performance. In particular, we found that the more company is oriented towards codification knowledge management strategy, the stronger the positive HRM-performance relationship and the stronger the mediating effect of intellectual capital. However, analyzing decomposed variables of HRM (ability-enhancing, motivation-enhancing and opportunity enhancing) and specific intellectual capital resources (human, social and structural capitals), we found little support to the moderating role of knowledge management strategies in proposed relationships. The paper provides a valuable contribution strategic HRM literature and knowledge-based theory of the firm. |
| Keywords: | human resource management, knowledge management strategies, intellectual capital, HRM practices, knowledge-intensive firms, Russia, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:sps:wpaper:15119&r=all |
| By: | Xavier Giroud; Holger M. Mueller |
| Abstract: | This paper shows that buildups in firm leverage predict subsequent declines in aggregate regional employment. Using confidential establishment-level data from the U.S. Census Bureau, we exploit regional heterogeneity in leverage buildups by large U.S. publicly listed firms, which are widely spread across U.S. regions. For a given region, our results show that increases in firms’ borrowing are associated with “boom-bust” cycles: employment grows in the short run but declines in the medium run. Across regions, our results imply that regions with larger buildups in firm leverage exhibit stronger short-run growth, but also stronger medium-run declines, in aggregate regional employment. We obtain similar results if we condition on national recessions–regions with larger buildups in firm leverage prior to a recession experience larger employment losses during the recession. When comparing regional firm and household leverage growth, we find qualitatively similar patterns for both. Finally, we find that regions whose firm leverage growth comoves more strongly also exhibit stronger comovement in their regional business cycles. |
| JEL: | E24 E32 G32 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25325&r=all |
| By: | Nicolas Berman (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE & CEPR); Vincent Rebeyrol (Toulouse School of Economics, University of Toulouse Capitole); Vincent Vicard (CEPII & Banque de France) |
| Abstract: | This paper provides direct evidence that learning about demand is an important driver of firms' dynamics. We present a model of Bayesian learning in which firms are uncertain about their idiosyncratic demand in each of the markets they serve, and update their beliefs as noisy information arrives. Firms are predicted to update more their beliefs to a given demand shock, the younger they are. We test and empirically confirm this prediction, using the structure of the model together with exporter-level data to identify idiosyncratic demand shocks and the firms’ beliefs about future demand. Consistent with the theory, we also find that the learning process is weaker in more uncertain environments. |
| Keywords: | firm growth, belief updating, demand, exports, uncertainty |
| JEL: | D83 F14 L11 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1846&r=all |
| By: | Tamas Csabafi (University of Missouri-St. Louis - Department of Economics); Max Gillman (University of Missouri-St. Louis; IEHAS, Budapest; CERGE-EI, Prague); Ruthira Naraidoo (Department of Economics - University of Pretoria, South Africa) |
| Abstract: | The paper extends a standard two-country international real business cycle model to include financial intermediation by banks of loans and government bonds. Taking in household deposits from home and abroad, the loans are produced by the bank in a Cobb-Douglas production approach such that a bank productivity shock can explain financial data moments. The paper contributes an explanation, for both the US relative to the Euro-area, and the US relative to China, of cross-country correlations of loan rates, deposit rates, and the loan premia. It provides a sense in which financial retrenchment resulted in the US following the 2008 bank crisis, and how the Euro-area and China reacted. The paper contributes evidence of how the Euro-area has been more financially integrated with the US, and China less financially integrated, with the Euro-area becoming more financially integrated after the 2008 crisis, and China becoming less so integrated. |
| Keywords: | International Real Business Cycles, Financial Intermediation, Credit Spread, Bank Productivity, 2008 Crisis |
| JEL: | E13 E32 E44 F41 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1830&r=all |
| By: | HUR, Jung; YOON, Haeyeon |
| Abstract: | This study examines resource reallocation within firms by investigating how firms change their product portfolios in response to a fall in trade costs. Using Korean firm-product data, we show that firms experiencing large tariff reductions under the Korea-US free trade agreement are more likely to shrink their product scope. They not only decrease the number of products but also specialize their production in specific products. Furthermore, we show that those specific products are relatively more productive than others within firm by estimating a firm-product efficiency. Dropped and added products tend to be less efficient than incumbent products. However, given the sharp increase in added products’ efficiencies after they enter, the above result may not indicate the low efficiency of new products, but rather the time needed to become organized and profitable. After considering the production distributions of incumbent products within firms, this study finds that firms tend to increase the proportion of efficient products in response to tariff reductions. In other words, firms allocate resources from less efficient products to more efficient ones. |
| Keywords: | Multi-product firms, Product mix, Product scope, Tariffs, KORUS FTA |
| JEL: | F10 F15 L11 L25 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-82&r=all |
| By: | Mpho Tsebe; Veron Vukeya; Christine Lewis; Flavio Calvino; Chiara Criscuolo |
| Abstract: | Until recently a lack of data meant that little was known about the distribution of firms and firm dynamics in South Africa. A new firm-level panel dataset based on tax data creates opportunities to better understand how firms enter, grow and exit. By using the OECD’s DynEmp framework, which was designed to create harmonised variables based on confidential firm-level data, this paper provides new insights about the dynamics of firms in South Africa and how these compare to other countries. One concerning finding is that the entry rate of formal sector firms was probably below the exit rate in recent years, which means that firms are growing older. The relatively low start-up rate compared to other countries together with the higher average firm size of entrants are consistent with the low rates of entrepreneurial activity and the presence of barriers to firm entry highlighted in the existing literature on the South African economy. As in other countries, young firms have disproportionately contributed to employment growth and remained net job creators even as GDP growth slowed. Nonetheless, large firms are particularly prominent in the South African economy, including as net job creators. |
| Keywords: | Employment dynamics, Firm demographics, Firm-level data, South Africa, Start-ups |
| JEL: | D22 L11 L26 O55 |
| Date: | 2018–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1528-en&r=all |
| By: | Nicolas Berman (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Vincent Rebeyrol (TSE - Toulouse School of Economics - Toulouse School of Economics); Vincent Vicard (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, Centre de recherche de la Banque de France - Banque de France) |
| Abstract: | This paper provides direct evidence that learning about demand is an important driver of firms' dynamics. We present a model of Bayesian learning in which firms are uncertain about their idiosyncratic demand in each of the markets they serve, and update their beliefs as noisy information arrives. Firms are predicted to update more their beliefs to a given demand shock, the younger they are. We test and empirically confirm this prediction, using the structure of the model together with exporter-level data to identify idiosyncratic demand shocks and the firms' beliefs about future demand. Consistent with the theory, we also find that the learning process is weaker in more uncertain environments. |
| Keywords: | firm growth,belief updating,demand,exports,uncertainty |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01945313&r=all |
| By: | Giammario Impullitti; Omar Licandro; Pontus Rendahl |
| Abstract: | We study the gains from trade in a new model with oligopolistic competition, firm heterogeneity, and innovation. Lowering trade costs reduces markups on domestic sales but increases markups on export sales, as firms do not pass the entire reduction in trade costs onto foreign consumers. Trade liberalisation can also reduce the number of firms competing in each market, thereby increasing markups on both domestic and export sales. For the majority of exporters, however, the pro- competitive effect prevails and their average markups decline. The incomplete pass-though and the reduction in the number of competitors instead dominate for top-exporters - the top 0.1% of firms - which end up increasing their markup. In a quantitative exercise we find that the aggregate effect of trade-induced markup changes is pro-competitive and accounts for the majority of the welfare gains from trade. Trade-induced changes in competition affect survival on domestic and export markets and firms' decision to innovate. All exporters, and especially the top exporters, increase their market size after liberalisation which, in turn, encourages them to innovate more. Hence, top exporters contribute negatively to welfare gains by increasing their markups but positively by increasing innovation and productivity. Firms' innovation response accounts for a small but non-negligible share of the welfare gains while the contribution of selection is U-shaped, being negative for small liberalisations and positive otherwise. A more globalised economy is therefore populated by larger, fewer and more innovative firms, each feature representing an important source of the gains from trade. |
| Keywords: | Gains from trade, heterogeneous firms, oligopoly, innovation, endogenous markups, endogenous market structure |
| JEL: | F12 F13 O31 O41 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1587&r=all |
| By: | Ermolaeva, L.; Freixanet, J.; Panibratov, A. |
| Abstract: | Exporters' advantages have been discussed in the literature for many decades. Scholars report positive influence of export on firm'’ productivity, efficiency, innovativeness etc. However different contexts suggest different outcomes of the exporting activity. The aim of this study is to analyze the interplay between firms' absorptive capacity, export orientation and innovation strategy of Russian firms. We argue that for Russian firms developed absorptive capacity is an essential antecedent of exporting capacity. Moreover absorptive capacity not only affects firms’ export strategies but is affected itself by export and innovation strategy of the firm. We test our hypotheses using Confirmatory Factor Analysis (CFA). The data was collected by survey of Russian exporters. Total sample accounts 107 observations. |
| Keywords: | internationalization, export, innovation,, absorptive capacity, Russia, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:sps:wpaper:15108&r=all |
| By: | Manuel Barron (Universidad del Pacífico); Willy Sacio |
| Abstract: | When export promotion agencies target specific products, they can crowd-out exports of other products, if firms focus on exporting the products for which they receive assistance, or foster them, if firms leverage the know-how and contacts acquired from the program. Thus, the net effect on total exports and export composition is theoretically ambiguous. We estimate the effects of Sierra Exportadora, one of Peru's flagship export promotion agencies, on its beneficiaries' exports of non-sponsored products. Using a comprehensive dataset of exporters we show that beneficiary firms exports of non-sponsored products increased by 20%, roughly as much as exports of sponsored products. We show that a large fraction of this change is due to changes in the extensive margins, suggesting that beneficiary firms leveraged contacts and know-how acquired from the program to export new non-sponsored products. We find that the effects are larger for firms with more pre-program experience exporting and higher pre-treatment exports. |
| Keywords: | Export promotion, within-firm spillovers, trade policy |
| JEL: | F13 F14 L25 O24 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:138&r=all |
| By: | Hashmat Khan (Department of Economics, Carleton University); Matthew Strathearn (Department of Economics, Carleton University) |
| Abstract: | We develop and test a novel prediction of the theory of collusion over the business cycle. Building on Haltiwanger and Harrington (1991), we present a model of collusive behaviour in the presence of persistent demand and an Antitrust Authority (AA) in a Cournot framework. The level of collusion is higher during a boom relative to a recession as collusion occurs more frequently when demand is increasing (entering into a collusive arrangement is more profitable and deviating from an existing cartel is less profitable). The model predicts that the number of discovered cartels and hence an- titrust filings should be procyclical because the level of collusion is procyclical. Using a unique data set of United States Antitrust filings, we present robust evidence con- sistent with the model's prediction. We find that antitrust filings are procyclical even after controlling for AA's monitoring intensity. The evidence suggests that procyclical competition policies may be a cost minimizing solution to asymmetries in collusive behaviour over the business cycle. |
| Keywords: | Collusion; Cournot Competition; Antitrust Filings; Business Cycle |
| JEL: | C73 L13 E32 |
| Date: | 2018–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:18-13&r=all |
| By: | Wales, W.; Shirokova, G.; Bogatyreva, K.; Germain, R. |
| Abstract: | Since its emergence, entrepreneurial orientation (EO) has grown in prominence to represent a central concept in corporate entrepreneurship. Despite the importance of EO, in-sufficient attention has been devoted to EO in emerging markets and transitional economies. In this paper, we examine the international exposure of managers within an emerging market context as a driver of their firms’ EO formation as well other potentially impactful forces such as foreign competition growth in their domestic market and the level of involvement into in-ternational economic activity within the region where the firm operates. We explore the focal relationships using a sample of 769 manufacturing firms from Russia, a BRIC country that has received very little attention within the literature on corporate entrepreneurship in general and EO in particular. Our findings indicate importance of managerial international exposure and industry foreign competition growth in the process of EO formation. At the same time, the former is shown to be a context-specific EO driver. Implications are discussed. |
| Keywords: | entrepreneurial orientation, international exposure, regional involvement into international economic activity, Russia, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:sps:wpaper:15121&r=all |
| By: | Annamaria Menichini (CSEF, Università di Salerno); Maria Grazia Romano (University of Salerno and CSEF) |
| Abstract: | The paper presents a theory of leasing in which asset use and maintenance shape the firm's decision between purchasing or leasing productive assets. When the maintenance of the asset cannot be carefully specified as part of the loan agreement, its level may be suboptimal, and jeopardise the return to the financiers in case of default, thus eroding the benefit of collateral pledging, particularly relevant for financially constrained firms. Operating leasing allows to overcome such shortcoming, as the maintenance is delegated to the lessor. However, this delegation generates a novel moral hazard problem on the lessee, who, by not paying for maintenance, does not internalise the use incentive and may practice inefficiently low levels of care and cause asset depletion. The paper characterises circumstances in which it may be optimal to lease rather than buy and rationalises some observed features of leasing contracts. |
| Keywords: | Collateral, Financial constraints, Leasing, Maintenance. |
| JEL: | D82 G32 |
| Date: | 2018–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:520&r=all |