nep-bec New Economics Papers
on Business Economics
Issue of 2019‒05‒06
fifteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Earnings Dynamics and Firm-Level Shocks By Benjamin Friedrich; Lisa Laun; Costas Meghir; Luigi Pistaferri
  2. Entrepreneurial Human Capital and Firm Dynamics By Francisco Queiró
  3. Product market competition and gender discrimination By Dudley Cooke; Ana P. Fernandes; Priscila Ferreira
  4. Earnings Dynamics and Firm-Level Shocks By Benjamin Friedrich; Lisa Laun; Costas Meghir; Luigi Pistaferri
  5. Competition and Firm Productivity: Evidence from Portugal By Pedro Carvalho
  6. Firm Size, Quality Bias and Import Demand By Blaum, Joaquin; Lelarge, Claire; Peters, Michael
  7. HR Integration, HR Strategy, and HR Partnership - Comparing the "Strategic Partner" between the USA and Germany By Klaas Szierbowski-Seibel; Marius Claus Wehner; Rüdiger Kabst
  8. Individual attitudes and market dynamics towards imprecision By Christoph Huber; Julia Rose
  9. Importing after exporting By Facundo Albornoz; Ezequiel Garcia-Lembergman
  10. Non-answers during Conference Calls By Gow, Ian D.; Larcker, David F.; Zakolyukina, Anastasia A.
  11. Cloud computing and firm growth By Timothy DeStefano; Richard Kneller; Jonathan Timmis
  12. The Comparative Advantage of Firms By Boehm, Johannes; Dhingra, Swati; Morrow, John
  13. Blockchain and Smart-contract: a pioneering Approach of inter-firms Relationships? The case of franchise networks By Richard Baron; Magali Chaudey
  14. Upstream, Downstream & Common Firm Shocks By Grant, Everett; Yung, Julieta
  15. Credit supply and human capital: evidence from bank pension liabilities By Barbosa, Luciana; Bilan, Andrada; Célérier, Claire

  1. By: Benjamin Friedrich; Lisa Laun; Costas Meghir; Luigi Pistaferri
    Abstract: We use matched employer-employee data from Sweden to study the role of the firm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We find that firm-specific permanent productivity shocks transmit to individual wages, but the effect is mostly concentrated among the high-skilled workers; firm-specific temporary shocks mostly affect the low-skilled. The updates to worker-firm specific match effects over the life of a firm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by firms accounting for 44% of cross-sectional variance by age 55.
    JEL: I18 J24 J31 J63
    Date: 2019–04
  2. 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
  3. By: Dudley Cooke (University of Exeter); Ana P. Fernandes (University of Exeter); Priscila Ferreira (University of Minho, NIMA)
    Abstract: This paper presents novel empirical evidence for the prediction from Becker’s (1957) famous theory, that competition will drive discrimination out of the market. We use a comprehensive firm entry deregulation reform in Portugal as a quasi-natural experiment to study the effect of increased product market competition on gender discrimination. We use employer-employee data for the universe of private sector firms and workers, and exploit the staggered implementation of the reform across municipalities for identification. Increased competition following the deregulation reduces the gender pay gap for medium- and high-skill workers but not for the low-skilled. The gender pay gap is also reduced for workers in managerial positions, except for the CEO. We also find that the share of females in managerial positions increased in affected municipalities. Existing evidence has shown that gender discrimination reduces output; our findings suggest that deregulation can contribute to reduce inefficiencies arising from gender discrimination.
    Keywords: Deregulation, Discrimination, Entry, Gender Pay Gap, Product Market Competition, Wage Structure.
    JEL: J16 J31 J71
    Date: 2018–05
  4. By: Benjamin Friedrich (Northwestern University, Kellogg School of Management); Lisa Laun (IFAU); Costas Meghir (Cowles Foundation, Yale University); Luigi Pistaferri (Stanford University, NBER, CEPR and SIEPR)
    Abstract: We use matched employer-employee data from Sweden to study the role of the firm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We ?nd that firm-specific permanent productivity shocks transmit to individual wages, but the e?ect is mostly concentrated among the high-skilled workers; firm-specific temporary shocks mostly affect the low-skilled. The updates to worker-firm specific match effects over the life of a firm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by firms accounting for 44% of cross-sectional variance by age 55.
    Keywords: Earnings dynamics, Inequality, Earnings dispersion, Rent sharing, Matched employer-employee data, competition in labor markets, Lifecycle wage growth, Lifecycle wage dispersion
    JEL: J24 J31 J62 J63 J64
    Date: 2019–04
  5. By: Pedro Carvalho
    Abstract: This paper presents empirical evidence on the impact of competition on firm productivity for the Portuguese economy. To that effect, firm-level panel data comprising information between 2010 and 2015 gathered from the Integrated Business Accounts System (Portuguese acronym: SCIE) is used. The database enables the construction of economic and financial indicators, which allow for isolating the impact of competition on firm-level productivity. We find a positive relationship between competition and both total factor productivity and labor productivity. This relationship is found to be robust to different specifications and in accordance with the results in the literature obtained for other countries.
    Keywords: Competition, Productivity, Portugal
    JEL: D40 D24 O47
    Date: 2018–07
  6. By: Blaum, Joaquin; Lelarge, Claire; Peters, Michael
    Abstract: Commonly used firm-based models of importing imply that firm productivity should have no effect on the allocation of expenditure across a common set of sourcing countries. Using French data, we show that this homotheticity property is soundly rejected: larger firms concentrate their import spending on their top varieties, holding the sourcing strategy fixed. To rationalize this finding, we propose a novel model of importing that features (i) a complementarity between firm productivity and input quality and (ii) heterogeneity across countries in their ability to produce high quality inputs. This model implies that large firms bias their spending towards countries with a comparative advantage in producing high quality inputs and hence generates a non-homothetic import demand system. We provide empirical support for this and other predictions of this theory.
    Keywords: Firm Heterogeneity; firm size; non-homothetic import demand; quality-productivity complementarity; trade in intermediate inputs
    JEL: D21 D22 D24 F11 F12 F14
    Date: 2019–04
  7. By: Klaas Szierbowski-Seibel (Paderborn University); Marius Claus Wehner (Heinrich-Heine-Universität Düsseldorf); Rüdiger Kabst (Paderborn University)
    Abstract: Previous research in HRM has repeatedly advocated for a stronger involvement of the HR function in strategy formulation processes and better cooperation with line managers because both promise positive organizational outcomes and competitive advantages. However, empirical evidence of a positive influence of stronger strategic involvement is still limited, especially for the contextual influence of HR strategy and the institutional environment in organizational processes. This study examines whether stronger strategic HR integration in strategy formulation and sharing responsibilities is beneficial for organizations that are located in two diverse institutional environments. Using the responses of 849 German and US-based organizations from the Cranet survey in 2008/2009, the results show that early HR integration into business strategy formulation facilitates the existence of a formal HR strategy. In turn, a formal HR strategy enhances the positive outcomes of sharing responsibilities between the HR function and line management (i.e., HR partnership), whereas HR strategy and business strategy do not appear to be complements for decreasing turnover. Finally, we find differences in the existence of a formal HR strategy and the relationship between HR partnership and turnover among German and US-based organizations.
    Keywords: HR partnership, strategic partner, HR strategy, HR integration, employee turnover, new institutionalism (keywords)
    Date: 2019–04
  8. By: Christoph Huber; Julia Rose
    Abstract: In real world financial markets, dividend processes as well as fundamental values are governed by imprecision; neither the objective probabilities of returns nor the actual amounts of possible returns are known for certain. With a novel experimental approach, we analyze the impact of risk, imprecision in probabilities (ambiguity), imprecision in outcomes, and a combination of the latter two in an individual decision task and in a market environment. In contrast to the previous literature, we do not find any significant imprecision premia for imprecise probabilities. However, we do find significant and persistent imprecision-in-outcomes seeking in the individual task as well as the market setting. Looking deeper into the combination of individual attitudes and market behavior, we find that these patterns survive despite a high level of heterogeneity in individual's beliefs about outcomes.
    Keywords: ambiguity aversion, imprecision, uncertainty, asset markets, experimental finance
    JEL: G11 G12 C92 D81
    Date: 2019–06
  9. By: Facundo Albornoz; Ezequiel Garcia-Lembergman
    Abstract: In this paper, we uncover a novel fact about the relationship between exporting and importing. Using a comprehensive database of Argentine firms, we find that exporting to a new destination increases the probability of a firm beginning to import from that market within the lapse of one year. We develop a model of import and export decisions to study the effect of productivity and import costs on the intensive and extensive margins of importing. Comparing these predictions with the observed effect of reaching new export destinations, we argue that export entry in a market reduces import costs in that market. We show that importing after exporting is stronger in distant markets and in situations where importing involves non-homogeneous and rarely imported goods. Furthermore, the effect on the probability of importing remains, regardless on whether the firm survives in the export market. Taken together, our results suggest that firms gain knowledge on -or establish links with- potential suppliers after export entry, which reduces the costs associated with searching for import sources. The effect of export entry on sourcing costs has implications that go beyond offering insights on importing: according to our quantitative exercise, import costs fall 53% in a given destination after export entry (from US$ 49,600 to US$ 26,600), and the estimated import cost savings increase for distant markets outside the Americas.
    Keywords: importing; exporting; trading costs; learning
    Date: 2019
  10. By: Gow, Ian D. (University of Melbourne); Larcker, David F. (Stanford University); Zakolyukina, Anastasia A. (University of Chicago)
    Abstract: We construct a novel measure of disclosure choice by firms. Our measure uses linguistic analysis of conference calls to flag a manager’s response as providing an explicit “non-answer†to an analyst’s question. Using our measure, about 11% of questions elicit non-answers, a rate that is stable over time and similar across industries. Consistent with extant theory, we find firms are less willing to disclose when competition is more intense, but more willing to disclose prior to raising capital. An important feature of our measure is that it yields several observations for each firm-quarter, which allows us to examine disclosure choice within a call as a function of properties of the question. We find product-related questions are associated with non-answers, and this association is stronger when competition is more intense, suggesting product-related information has higher proprietary cost. While firms are more forthcoming prior to raising capital, the within-call analyses for future-performance-related questions shows firms are less likely to answer future-performance-related questions shortly before equity or debt offerings when legal liability is higher.
    Date: 2019–01
  11. By: Timothy DeStefano; Richard Kneller; Jonathan Timmis
    Abstract: The arrival of the cloud has enabled a shift in the nature of ICT use, from investment in sunk capital to a pay-on-demand service that allows firms to rapidly scale up. This paper uses new firm-level data to examine the impact of cloud on firm growth in the UK, using zipcode-level instruments of the timing of high-speed fibre availability and expected speeds. We find cloud leads to the growth of young firms in terms of employment and productivity, but they become more concentrated in fewer plants. For older firms we find no scale or productivity growth, but instead disperse activity by closing plants and moving employment further from the headquarters. In addition, the plants that close tend to be those without access to fibre broadband.
    Keywords: firm growth; the cloud; ICT use; employment; productivity
    Date: 2019
  12. By: Boehm, Johannes; Dhingra, Swati; Morrow, John
    Abstract: Multiproduct firms dominate production, and their product turnover contributes substantially to aggregate growth. Theories propose that multiproduct firms grow by diversifying into products which need the same know-how or capabilities, but are less clear on what these capabilities are. Input-output tables show firms co-produce in industries that share intermediate inputs, suggesting input capabilities drive multiproduct production patterns. We provide evidence for this in Indian manufacturing: the similarity of a firm's input mix to an industry's input mix predicts entry into that industry. We identify the direction of causality from the removal of size-based entry barriers in input markets which made firms more likely to enter industries that were similar in input use to their initial input mix. We rationalize this finding with a model of industry choice and economies of scope to estimate the importance of input capabilities in determining comparative advantage. Complementarities driven by input capabilities make a firm on average 5% (and up to 15%) more likely to produce in an industry. Entry barriers in input markets constrained the comparative advantage of firms and were equivalent to a 10.5 percentage point tariff on inputs.
    Keywords: comparative advantage; Economies of scope; firm capabilities; Multiproduct Firms; size-based policies; vertical input linkages
    JEL: F11 L25 M2 O3
    Date: 2019–04
  13. By: Richard Baron (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint- Etienne, France); Magali Chaudey (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint- Etienne, France)
    Abstract: This paper is interested in the analysis of Blockchains and Smart-contracts applied to inter-firms relationships, in particular the franchise networks. After defining the Blockchain technology and the Smart-contract as a particular type of contract stored in blockchains, we question the theory of contracts and its conception(s) of transactions, information asymmetries, firm or inter-firm relations. To better understand the challenges of blockchain for franchise networks and identify opportunities for implementation in these networks, we present some relevant applications of this technology. We identify different ways where blockchain technology could improve the network management and therefore their performance: the supply-chain, the brand-name protection, security and transparency in the payment of fees and royalties, access to reliable information via an oracle.
    Keywords: Blockchain, Smart-Contract, Transaction cost, Network, Franchise
    JEL: D86 L14 L81 O33
    Date: 2019
  14. By: Grant, Everett (Federal Reserve Bank of Dallas); Yung, Julieta (Bates College)
    Abstract: We develop a multi-sector DSGE model to calculate upstream and downstream industry exposure networks from U.S. input-output tables and test the relative importance of shocks from each direction by comparing these with estimated networks of firms’ equity return responses to one another. The correlations between the upstream exposure and equity return networks are large and statistically significant, while the downstream exposure networks have lower — but still positive — correlations that are not statistically significant. These results suggest a low short-term elasticity of substitution across inputs transmitting shocks from suppliers, but more flexible ties with downstream firms. Additionally, both the DSGE model and simulations of our empirical approach highlight the importance of accounting for common factors in network estimation, which become more important over our 1989-2017 sample period, explaining 11.7% of equity return variation over the first ten years and 35.0% over the final ten.
    Keywords: upstream versus downstream; input-output linkages; firm networks; shock propagation; aggregate shocks
    JEL: C32 D85 E23 E44 G01
    Date: 2019–04–12
  15. By: Barbosa, Luciana; Bilan, Andrada; Célérier, Claire
    Abstract: We identify the effects of exogenous credit constraints on firm ability to attract and retain skilled workers. To do so, we exploit a shock to the value of the pension obligations of Portuguese banks resulting from a change in accounting norms. Using bank-firm credit exposures that we match with a census of all Portuguese employees, we show that firms in a relationship with affected banks borrow less and reduce employment mostly of high-skilled workers. High-skilled workers are more likely to exit and less likely to join affected firms. Overall, credit market frictions might have long lasting effects on firm productivity and growth through firm accumulation of human capital. JEL Classification: G21, J21, J24
    Keywords: credit frictions, employment, skills, wages
    Date: 2019–04

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