nep-bec New Economics Papers
on Business Economics
Issue of 2019‒02‒11
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Productivity and wage effects of firm-level collective agreements: Evidence from Belgian linked panel data By Andrea Garnero; Francois Rycx; Isabelle Terraz
  2. Non-linear Incentives and Worker Productivity and Earnings: Evidence from a Quasi-experiment By Richard B. Freeman; Wei Huang; Teng Li
  4. What's Behind the Figures? Quantifying the Cross-Country Exporter Productivity Gap By Kozo Kiyota; Toshiyuki Matsuura; Lionel Nesta
  5. Innovation and Corporate Cash Holdings in the Era of Globalization By Konrad Adler; JaeBin Ahn; Mai Chi Dao
  6. “Green regions and local firms’ innovation” By Lorena M. D’Agostino; Rosina Moreno
  7. Digital Dividend: Policies to Harness the Productivity Potential of Digital Technologies By Stéphane Sorbe; Peter Gal; Giuseppe Nicoletti; Christina Timiliotis
  8. Immigrant Innovators and Firm Performance By Fornaro, Paolo; Maliranta, Mika; Rouvinen, Petri
  9. How to apply penalties to avoid delays in projects By Bergantiños, Gustavo; Lorenzo, Leticia

  1. By: Andrea Garnero; Francois Rycx; Isabelle Terraz
    Abstract: How do firm-level collective agreements affect firm performance in a multi-level bargaining system? Using detailed Belgian linked employer-employee panel data, our findings show that firm agreements increase both wage costs and labour productivity (with respect to sector-level agreements). Relying on a recent approach developed by Bartolucci (2014), they also indicate that firm agreements exert a stronger impact on wages than on productivity, so that on average profitability is hampered. However, this rent-sharing effect only holds in sectors where firms are more concentrated. Firm agreements are thus mainly found to raise wages beyond labour productivity when the rents to be shared between workers and firms are relatively big. Overall, this suggests that firm-level agreements benefit both employers and employees – through higher productivity and wages – without being detrimental to firms’ gross profits.
    JEL: C33 J24 J31
    Date: 2019–02–11
  2. By: Richard B. Freeman; Wei Huang; Teng Li
    Abstract: Firms often use non-linear incentive systems to motivate workers to achieve specified goals, such as paying bonuses to reach targets in sales, production, or cost reduction. Using administrative data from a major Chinese insurance firm that raised its sales targets and rewards for insurance agents greatly in 2015, we find that increased incentives induced agents to increase sales of the increasingly incentivized life insurance products, bunched around the new targets, albeit in part with some low quality sales that led to canceled contracts, while reducing sales of products out-side the new incentive system. The greater non-linear incentives raised agent incomes and low-ered turnover and substantially increased firm revenues net of the increase in payments to agents. The stock market reacted to the new system with a jump in the firms’ share price relative to its main competitor by 15-20% in the days surrounding introduction of the new system.
    JEL: J00 J22 J3 M5 M52
    Date: 2019–01
  3. By: Gaygysyz Ashyrov; Jaan Masso
    Abstract: Until recently, studies have not reached any general agreement on how a corrupt environment influences foreign investments. Furthermore, far too little attention has so far been paid to how corruption relates to the performance of foreign and domestically owned firms. This paper exploits cross-sectional firm-level data from the fifth round of the Business Environment and Enterprise Performance Survey (BEEPS V) for the purpose of investigating how bribery is associated with FDI and firm performance. By using various econometric estimation strategies, we find that foreign owned firms tend to pay larger bribes compared to domestically owned firms, while the negative size of these expenses on firm productivity is larger for foreign owned firms than domestically owned firms in highly corrupt countries. This study suggests that developing countries should fight against informal payments in bureaucracy to create corruption free environments, so that multinationals are incentivized to invest in their countries.
    Keywords: corruption, FDI, firm performance
    Date: 2019
  4. By: Kozo Kiyota (Keio Economic Observatory, Keio University); Toshiyuki Matsuura (Keio Economic Observatory, Keio University); Lionel Nesta (1. Universite Cote d'Azur, 2. OFCE Sciences Po. Paris, 3. SKEMA Business School)
    Abstract: We present a simple framework that allows us to examine the cross-country exporter productivity gap without accessing confidential firm-level data. This gap depends on the three readily available statistics: the productivity gap between two countries; the export participation rates; and export premia. This gap holds irrespective of the distribution underlying firm productivity and irrespective of the presence of fixed costs. Under specific conditions, allocative efficiency may affect the exporter productivity gap. The empirical analysis globally validates this exercise.
    Keywords: International productivity gap, Export premia, Competitiveness, Meta analysis
    JEL: F1 D24
    Date: 2018–12–21
  5. By: Konrad Adler; JaeBin Ahn; Mai Chi Dao
    Abstract: We document a broad-based trend in rising cash holdings of firms across major industrialized countries over the last two decades, a trend that is most pronounced for firms engaged strongly in R&D activities. Our contributions to the literature are twofold. First, we develop a simple model that brings together the insights from modern trade theory (Melitz, 2003) with those of contract theory in corporate finance (Holmström and Tirole, 1998) to show that increased openness to trade can result in rising returns to innovation and in turn greater demand for cash as firms insure against innovation-induced liquidity risk. Second, we derive sharp empirical predictions and find supporting evidence for them using firm-level data across major G7 countries during 1995-2014, a period that saw an unprecedented rise in globalization and business innovation.
    Date: 2019–01–18
  6. By: Lorena M. D’Agostino (Department of Economics and Management, University of Trento, via Inama, 5 - 38122 Trento (Italy). Tel. +390461283197 – Fax +390461882241.); Rosina Moreno (AQR-IREA Research Group, University of Barcelona. Av. Diagonal 690 - 08034 Barcelona (Spain). Tel. +34934021823 - Fax +34934021821.)
    Abstract: Technological innovation is essential to achieve simultaneously economic, environmental and social goals (i.e. the green growth). Indeed, many studies found that environmental innovation spurs overall innovation. However, this topic has not been investigated by taking into account the geographical context. Therefore, our paper seeks to investigate whether ‘green regions’, with an increased public and private commitment in environmental issues, are related to innovation of local firms. Using data on Spanish manufacturing firms and regions, we find that environmental technologies (especially in green energy), environmental investments, and environmental management at the level of regions are positively associated to local firms’ innovation.
    Keywords: innovation, region, firm, green patents, environment. JEL classification:R11, O31, O44.
    Date: 2019–02
  7. By: Stéphane Sorbe; Peter Gal; Giuseppe Nicoletti; Christina Timiliotis
    Abstract: This paper presents a range of policies to enhance adoption of digital technologies and firm productivity. It quantifies illustratively the effect of policy changes by combining the results of two recent OECD analyses on the drivers of adoption and their productivity benefits. Increasing access to high-speed internet, upgrading technical and managerial skills and implementing product and labour market reforms to facilitate the reallocation of resources in the economy are found to be the main factors supporting the efficient adoption of a selection of digital technologies. The most productive firms have benefitted relatively more from digitalisation in the past, contributing to a widening productivity gap with less productive firms. Policies should create the conditions for efficient adoption by less productive firms, which would help them to catch up, achieving a double dividend in terms of growth and inclusiveness. Enhancing skills has a key role to play in this area since less productive firms suffer relatively more from skill shortages.
    Keywords: competition, digitalisation, dispersion, ICT, productivity, regulation, skills
    JEL: D24 J24 O33
    Date: 2019–02–12
  8. By: Fornaro, Paolo; Maliranta, Mika; Rouvinen, Petri
    Abstract: Abstract We study immigrants’ effects on firm-level innovativeness. Managers, innovators, and other employees are considered as separate groups both in firm employment and in local areas. For each, we estimate the effects of foreignness, the share of immigrants in each group, and diversity, while controlling for an extensive set of employment and other firm characteristics. Pooled cross-section estimates suggest that a higher initial share of immigrant innovators is associated with a subsequently higher probability of a product innovation; the reverse holds for process innovation. In other words, product innovation benefits from a wider spectrum of innovator perspectives brought about by foreign influence, while process innovation suffers from it. The estimated effect for product innovation is modestly large but nevertheless indicates that a host of other covariates besides immigration are important for innovation. When measured by a fractionalization index, diversity among innovators does not promote product innovation. However, culturally the closest groups of migrants have a positive effect, when considered independently. Thus, in our interpretation, diversity does offer some benefits, provided that enough cultural homogeneity of the group is retained.
    Keywords: Immigration, Ethnicity, Diversity, Innovation, Knowledge production function, Finland
    JEL: D22 F22 J61 O31
    Date: 2019–02–01
  9. By: Bergantiños, Gustavo; Lorenzo, Leticia
    Abstract: A planner wants to carry out a project involving several firms. In many cases the planner, for instance the Spanish Administration, includes in the contract a penalty clause that imposes a payment per day if the firms do not complete their activities or the project on time. We discuss two ways of including such penalty clauses in contracts. In the first the penalty applies only when the whole project is delayed. In the second the penalty applies to each firm that incurs a delay even if the project is completed on time. We compare the two penalty systems and find that the optimal penalty (for the planner) is larger in the second method, the utility of the planner is always at least as large or larger in the second case and the utility of the firms is always at least as large or larger in the first. Surprisingly, the final delay in the project is unrelated to which penalty system is chosen.
    Keywords: game theory; PERT; delays; penalties
    JEL: C72
    Date: 2019–01–25

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