nep-bec New Economics Papers
on Business Economics
Issue of 2019‒03‒25
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Who Creates and Destroys Jobs over the Business Cycle? By Andrea Colciago; Volker Lindenthal; Antonella Trigari
  2. International Business Cycle and Financial Intermediation By Tamas Csabafi; Max Gillman; Ruthira Naraidoo
  3. Digital platform innovation in European SMEs. An analysis of SME Instrument Business Proposals and Case Studies. By Chiara Eleonora De Marco; Alberto Di Minin; Cristina Marullo; Daniel Nepelski
  4. Leveraging Loyalty Programs Using Competitor Based Targeting By Hollenbeck, Brett; Taylor, Wayne
  5. The Market for Data Privacy By Ramadorai, Tarun; Uettwiller, Antoine; Walther, Ansgar
  6. Gender Differences within the Firm: Evidence from Two Million Travelers By Donna, Javier D.; Veramendi, Gregory F.
  7. What is the Impact of Increased Business Competition? By Sónia Félix; Chiara Maggi
  8. Determinants of Locational Patenting Behavior of Canadian Firms By Eckert, Andrew; Langinier, Corinne; Zhao, Long
  9. Geography, Competition, and Optimal Multilateral Trade Policy By Nocco, Antonella; Ottaviano, Gianmarco; Salto, Matteo
  10. Firm Size Distribution and Variable Elasticity of Demand By Yuichiro Matsumoto
  11. Vertical Integration and Foreclosure: Evidence from Production Network Data By Johannes Boehm; Jan Sonntag
  12. Asymmetric additionalities between R&D outsourcing locations By María García-Vega; Elena Huergo

  1. By: Andrea Colciago; Volker Lindenthal; Antonella Trigari
    Abstract: Using US annual data spanning four decades and several business cycles, we show that that job flow rates of young firms are more cyclical than those of mature firms and detect no difference between the cyclicality of job flow rates of small and large firms. Further, we find that job flow rates due to contractions and expansions of continuing establishments are more cyclical than those due to entry and exit. At the same time the job flow rates of mature firms provide a larger contribution to the overall variability of aggregate job flow rates with respect to those of young firms. The reason is that mature firms employ the vast majority of US workers, and the fraction of aggregate variability of aggregate job flows explained by the job flow of firms belonging to a specific category is proportional to the category's employment share. On the contrary, there is no relevant difference in the contribution to aggregate fluctuations between the job flow rates of firms of different sizes. Our findings hold independently of whether we focus simply on the Great Recession period or on the full sample.
    Keywords: Job Creation; Job Destruction; Business Cycle; Small Firms; Large Firms; Young Firms; Mature Firms
    JEL: D22 E23 E32 J23 L25
    Date: 2019–03
  2. By: Tamas Csabafi (Department of Economics, University of Missouri-St. Louis); Max Gillman (Department of Economics, University of Missouri-St. Louis); Ruthira Naraidoo (Department of Economics, University of Pretoria)
    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 Önancially 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: 2018–09
  3. By: Chiara Eleonora De Marco (Haas School of Business, Garwood Centre for Corporate Innovation, UC Berkeley, CA-US; Institute of Management, Scuola Superiore Sant’Anna, Pisa); Alberto Di Minin (Institute of Management, Scuola Superiore Sant’Anna, Pisa); Cristina Marullo (Institute of Management, Scuola Superiore Sant’Anna, Pisa); Daniel Nepelski (European Commission - JRC)
    Abstract: The study explores how European SMEs applying to the SME Instrument (SMEi) funding scheme under Horizon 2020 innovate use the digital platform business model. The study demonstrates a widespread awareness of the digital platform concept as a tool to be applied to gain momentum and growth, taking advantage of the digital affordances. The main challenges to scale-up include how to manage external communities and orchestrate them in order to build innovation ecosystems; how to find a profitable business model; and secure funding for growth. Firms located in peripheral regions face additional difficulties in finding complementary resources.
    Keywords: digital platform, innovation, SME, H2020, SME Instrument, Europe
    Date: 2019–03
  4. By: Hollenbeck, Brett; Taylor, Wayne
    Abstract: Loyalty programs are widely used by firms but their effectiveness is subject to debate. These programs provide discounts and perks to loyal customers and are costly to administer, and with uncertain effectiveness at increasing spending or stealing business from rivals. We use a large new dataset on retail purchases before and after joining a loyalty program (LP) at the customer level to evaluate what determines LP effectiveness. We exploit detailed spatial data on customer and store locations, including locations of competing firms. A simple analysis shows that location relative to competitors is the strongest predictor of LP effectiveness, suggesting that LPs work primarily through business stealing and not through other demand expansion. We next estimate what variables best predict LP effectiveness using high-dimensional data on spatial relationships between customers, the focal firm’s stores, and competing stores as well as customers’ historical spending patterns. We use LASSO regularization to show that spatial relationships are more predictive of LP effects than are past sales data. Finally, we show how firms can use this type of predictive analytics model to leverage customer and competitor location data to substantially increase the performance of their LP through spatially driven targeting rules.
    Keywords: Loyalty programs, predictive analytics, spatial models, retail competition, machine learning
    JEL: C45 C52 L13 L21 M31
    Date: 2019
  5. By: Ramadorai, Tarun; Uettwiller, Antoine; Walther, Ansgar
    Abstract: We scrape a comprehensive set of US firms' privacy policies to facilitate research on the supply of data privacy. We analyze these data with the help of expert legal evaluations, and also acquire data on firms' web tracking activities. We find considerable and systematic variation in privacy policies along multiple dimensions including ease of access, length, readability, and quality, both within and between industries. Motivated by a simple theory of big data acquisition and usage, we analyze the relationship between firm size, knowledge capital intensity, and privacy supply. We find that large firms with intermediate data intensity have longer, legally watertight policies, but are more likely to share user data with third parties.
    Keywords: data markets; privacy; third-party sharing; web tracking
    JEL: D8 K2 L1
    Date: 2019–03
  6. By: Donna, Javier D.; Veramendi, Gregory F.
    Abstract: We document gender differences in the price paid for work-related air travel among similar workers within a firm. We show that women pay consistently less per ticket than men, after accounting for a large set of covariates that include the characteristics of the trips, the employers, and the employees. A large proportion of the lower fares paid by women is explained by women booking flights earlier than men. We investigate potential mechanisms that could explain the observed gender differences. We find that gender differences increase with age, but we find no deviation from this trend during the childbearing years. We also find significant variation in gender differences across the regions of the world. Using country-level data on preference differences we report that positive and negative reciprocity are factors associated with the documented gender differences, although this result is only suggestive. The documented gender differences have important monetary implications for firms and suggest a potentially important role of morale within a firm.
    Keywords: Gender differences; worker gender differences; airline industry
    JEL: D91 F00 J16 M50
    Date: 2018–08–06
  7. By: Sónia Félix; Chiara Maggi
    Abstract: This paper studies the impact of a structural reform that reduces entry costs for firms. We provide novel empirical evidence on the response of firms’ entry, employment, and exit behavior. To do so, we use as a natural experiment a reform in Portugal that significantly reduced entry time and costs. We find that the reform had an expansionary impact: firm entry and employment increased by 25% and 4% per year, respectively. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the firms that were the most productive before the reform. Standard models of entry, exit, and firm dynamics, which assume a constant elasticity of substitution, are inconsistent with our findings about the heterogeneous response of incumbents to the reform. We show that a model with heterogeneous firms and variable markups accounts for our evidence. In this framework, the most productive firms face a lower demand elasticity and increase their employment in response to the entry of new firms.
    JEL: D22 D40 E24 E64
    Date: 2019
  8. By: Eckert, Andrew (University of Alberta, Department of Economics); Langinier, Corinne (University of Alberta, Department of Economics); Zhao, Long (University of Alberta, Department of Economics)
    Abstract: Using a unique data set combining Canadian and U.S patent data with firm level data, we analyze Canadian firms' locational patenting decisions during the period 2000-2008. We f ind first that Canadian firms' propensity to patent increases in rm size and research and development intensity, but decreases in firm age and profitability. Second, the likelihood of patenting in both the U.S. and Canada is associated with past patenting experience, firm size, profitability and patent scope. While manufacturing firms in export intensive industries are more likely to patent in both countries, firms in Foreign Direct Investment intensive industries are more likely to patent domestically. Finally, Canadian Intellectual Property Office's role as an International Search Authority under the Patent Cooperation Treaty (PCT) is associated with an increase in the use of PCT by Canadian firms.
    Keywords: Canadian firms; locational patenting behavior
    JEL: O12 O34
    Date: 2019–03–18
  9. By: Nocco, Antonella; Ottaviano, Gianmarco; Salto, Matteo
    Abstract: How should multilateral trade policy be designed in a world in which countries differ in terms of market access and technology, and firms with market power differ in terms of productivity? We answer this question in a model of monopolistic competition in which variable markups increasing in firm size are a key source of misallocation across firms and countries. We use `disadvantaged' to refer to countries with smaller market size, worse state of technology (in terms of higher innovation and production costs), and worse geography (in terms of more remoteness from other countries). We show that, in a global welfare perspective, optimal multilateral trade policy should: promote the sales of low cost firms to all countries, but especially to disadvantaged ones; trim the sales of high cost firms to all countries, but especially to disadvantaged ones; reduce firm entry in all countries, but especially in disadvantaged ones. This would not only restore efficiency but also reduce welfare inequality between advantaged and disadvantaged countries if their differences in market size, state of technology and geography are large enough.
    Keywords: Firm Heterogeneity; International trade policy; monopolistic competition; multilateralism; Pricing to market
    JEL: D4 D6 F1 L0 L1
    Date: 2019–03
  10. By: Yuichiro Matsumoto (Osaka University)
    Abstract: Prior studies suggest that a Pareto distribution of the firm fs productivity distribution is difficult to replicate the observed log standard deviation of firm sales. These studies are based on constant elasticity preferences, which entail too low log sales deviation. The present study shows that, in contrast to constant elasticity cases, the log standard deviation is too high in variable elasticity cases. To match the observed sales dispersion, one must set a Pareto tail parameter relatively higher values.
    Keywords: Firm Size Distribution, Pareto Distribution, Variable Elasticity of Substitution
    JEL: L10 L11 L13
    Date: 2019–03
  11. By: Johannes Boehm (Département d'économie); Jan Sonntag (Département d'économie)
    Abstract: This paper studies the prevalence of vertical market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers’ competitors than when they vertically integrate with an unrelated firm. This relationship holds also, among other things, when conditioning on mergers that follow exogenous downward pressure on the supplier’s stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumored or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place.
    Keywords: Mergers and acquisitions; Market foreclosure; Vertical integration; Production networks
    JEL: L14 L42
    Date: 2018–12
  12. By: María García-Vega; Elena Huergo
    Abstract: This paper empirically examines the additionalities or crowding-out effects of international and national outsourcing of R&D to generate innovation. Using a panel database of about 10,000 Spanish firms for the period 2005-2014, we show that there is asymmetry in the effectiveness of the combined adoption of R&D outsourcing locations. International R&D outsourcing re-inforces the effect of domestic R&D outsourcing. However, national outsourcing does not re-inforce international R&D outsourcing. We next explore sources of additionality. Property Right Theory (PRT) suggests that additionality is high when holdup problems are low. We therefore analyze two important situations where holdup problems are likely to be low: with public foreign providers and in sectors with low technological complexity. Consistent with PRT, our results suggest that additionality is stronger when R&D is acquired from public providers rather than from private providers. Moreover, we find additionality in sectors with medium or low R&D complexity. In sectors with high R&D complexity, domestic and international outsourcing are largely independent. These results also suggest that international R&D outsourcing does not undermine domestic R&D.
    Keywords: Imports of technology; International and national R&D outsourcing; Innovation; Additionality or crowding-out effects. JEL classification: L25; O31; O32
    Date: 2019

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