nep-bec New Economics Papers
on Business Economics
Issue of 2019‒06‒17
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Role of Nonemployers in Business Dynamism and Aggregate Productivity By Pedro Bento; Diego Restuccia
  2. Concordance and Complementarity in IP Instruments By Marco Grazzi; Chiara Piccardo; Cecilia Vergari
  3. Effects of Outside Directors on Firms' Investment Behavior and Performance: Evidence from a Quasi-Natural Experiment in Japan (Japanese) By MORIKAWA Masayuki
  4. Leverage Dynamics: Do Financial Development and Government Leverage Matter? Evidence from a Major Developing Economy By Ibrahim Yarba; Zehra Nuray Guner
  5. Measuring trends and persistence in capital and labor misallocation By Maurice Bun; Jasper de Winter
  6. Community Origins of Industrial Entrepreneurship in Pre-Independence India By Bishnupriya Gupta; Dilip Mookherjee; Kaivan Munshi; Mario Sanclemente
  7. The Japanese corporate board network By Raddant, Matthias; Takahashi, Hiroshi
  8. Differential Impact of Uncertainty on Exporting Decision in Risk-averse and Risk-taking Firms By Haeng-Sun Kim
  9. Firm export diversification and change in workforce composition By Sarah Guillou; Tania Treibich
  10. Sources of Labor Productivity Growth in the German Brewing Industry By Giannis Karagiannis; Magnus Kellermann; Klaus Salhofer
  11. Boom-Bust Cycles of Learning, Investment and Disagreement By Osnat Zohar
  12. The Effect of Imported Intermediate Inputs on Firm Performance: Firm and Establishment Level Evidence from Japan (Japanese) By KIM YoungGak; INUI Tomohiko

  1. By: Pedro Bento; Diego Restuccia
    Abstract: A well-documented observation of the U.S. economy in the last few decades has been the steady decline in the net entry rate of employer firms, a decline in business dynamism, suggesting a possible connection with the recent slowdown in aggregate productivity growth. We consider the role of nonemployers, businesses without paid employees, in business dynamism and aggregate productivity. Notwithstanding the decline in the growth of employer firms, we show that the total number of firms, which includes nonemployer businesses, has increased in the U.S. economy since the early 1980s. We interpret this trend, along with the evolution of the employment distribution across firms, through the lens of a standard theory of firm dynamics. The model implies that firm dynamics have contributed to an average annual growth rate of aggregate productivity of at least 0.26% since the early 1980s, over one quarter of the productivity growth of 1% in the data. Further, our implied measure of productivity growth moves closely over time with measured productivity growth in the data.
    Keywords: Nonemployers, employer firms, business dynamism, productivity, TFP.
    JEL: O1 O4 O5 E02 E1
    Date: 2019–06–17
  2. By: Marco Grazzi; Chiara Piccardo; Cecilia Vergari
    Abstract: This work investigates the relationship between proxies of innovation activities, such as patents and trademarks, and firm performance in terms of revenues, growth and profitability. By resorting to the virtual universe of Italian manufacturing firms this work provides a rather complete picture of the Intellectual Property (IP) strategies pursued by Italian firms, in terms of patents and trademarks, and we study whether the two instruments for protecting IP exhibit complementarity or substitutability. In addition, and to our knowledge novel, we propose a measure of concordance (or proximity) between the patents and trademarks owned by the same firm and we then investigate whether such concordance exert any effect on performance.
    Keywords: Trademarks; Patents; Innovation; Intellectual Property; Complementarity; Concordance; Technological proximity; firm performance; firm growth.
    Date: 2019–06–14
  3. By: MORIKAWA Masayuki
    Abstract: This study, focusing on the recent quasi-exogenous increase in the number of outside (independent) directors among listed firms, presents empirical evidence on the impact of outside (independent) directors on investments and firm performance. Using a panel of Japanese firms, we make comparisons between listed and unlisted firms and instrumental variable estimations to examine causal relationships. According to the findings, rapid increase in the number of outside directors among listed firms does not promote positive investments and risk-taking behavior. In addition, it does not have significant impact on profitability or productivity of the firms. However, since the time horizon of the analysis is limited to up to two years after the change in the board structure, long-term impacts are beyond the scope of this study.
    Date: 2019–05
  4. By: Ibrahim Yarba; Zehra Nuray Guner
    Abstract: This study analyses leverage dynamics of Turkish non-financial firms over the last 20 years using a confidential and unique firm-level dataset. Results of dynamic panel estimations reveal that financial development fosters corporate leverage while government indebtedness inhibits it. Both impacts are more pronounced for private firms rather than public firms. Besides, even though improvements in financial development foster long-term debt usage for both SMEs and large firms, this impact seems stronger for SMEs. Conspicuously, results reveal that SMEs suffer much more than large firms in crowding-out periods of government leverage while both SMEs and large firms benefit in crowding-in periods. Moreover, higher business risk hinders corporate leverage of private firms and SMEs, which is not the case for either large firms or public firms. Results are robust to alternative firm size classification schemes and alternative model specifications.
    Keywords: Leverage dynamics, Financial development, Government leverage, Capital structure, Dynamic panel regression
    JEL: G31 G38 H32 O16
    Date: 2019
  5. By: Maurice Bun; Jasper de Winter
    Abstract: We analyze trends and persistence in the misallocation of labor and capital using firm-level panel data for the Netherlands in the period 2001-2017. We use the dispersion in marginal revenue products of labor and capital to measure the extent of misallocation. Compared to a counterfactual efficient allocation we find that misallocation has had a sizable negative impact on aggregate productivity. Especially capital misallocation has increased over time. The relatively high and rising capital misallocation is caused by a combination of small, highly productive firms facing relatively high capital wedges and large and unproductive firms facing relatively low capital wedges. Exploiting a panel data error components model we find that capital misallocation has a much more permanent character than labor misallocation. Moreover, it is the permanent component of capital misallocation that has increased over time. Finally, we show that in our sample the measurement of misallocation is largely insensitive to capital adjustment costs and alternative specifications of the production function. The contribution of heterogeneous markups to observed misallocation, however, is non-negligible.
    Keywords: misallocation; panel data; persistence; productivity
    JEL: C23 D24 O47
    Date: 2019–06
  6. By: Bishnupriya Gupta (University of Wawick); Dilip Mookherjee (Boston University); Kaivan Munshi (University of Cambridge); Mario Sanclemente (University of Warwick)
    Abstract: We argue that community networks played an important role in the emergence of Indian entrepreneurship in the early stages of the cotton textile and jute industry in the late 19th and early 20th century respectively, overcoming the lack of market institutions and government support. From business registers, we construct a yearly panel dataset of entrepreneurs in these two industries. We find no evidence of entry patterns being affected by price shocks or pre-industrial accumulation of wealth or experience in trading in the corresponding upstream sector. Firm directors exhibited a high degree of clustering of entrepreneurs by community. The dynamics of entry is consistent with a model of network-based dynamics.
    Date: 2018–12
  7. By: Raddant, Matthias; Takahashi, Hiroshi
    Abstract: We analyze the dynamics of the Japanese board network from 2004 until 2013. We find that the network exhibits some clustering with visible firm conglomerates. Ties between firms are rather persistent, despite noticeable churning among directors. Ownership relations explain only a small fraction of board links. Besides densely connected conglomerates, some tendency of within-sector linkages and linkages to financial institutions can be confirmed. We further investigate the increase in the number of outside directors and find that sectoral differences as well as shareholder characteristics explain to large extend the variation in board composition. The connectivity of firms in the ownership and board network is sometimes related to firm profitability. Firms that are linked to peers with above average profitability are likely also more profitable than firms in other ownership relationships.
    Keywords: corporate board interlock,corporate governance,board composition
    JEL: L14 M12 G32
    Date: 2019
  8. By: Haeng-Sun Kim (Jeju National University (KOREA), FFJ - Fondation France-Japon de l'EHESS - EHESS - École des hautes études en sciences sociales)
    Abstract: Most existing literature examining the links between firm heterogeneity and entry into exporting assumes that firms are risk neutral. In this study, we relax this strict assumption that firms are risk neutral and introduce different attitudes of firms toward risk as an additional source of firm heterogeneity. In particular, we examine how risk attitude changes the effect of uncertainty on the decision of a firm to export considering the different types of uncertainty faced by the firm, namely, firm-specific and macroeconomic. Our analysis yields two interesting findings. First, firm-specific uncertainty discourages risk-averse firms from participating in foreign markets more than risk-taking firms. One possible explanation for this finding is that risk-averse firms are more cautious in export market participation when firm-specific uncertainty increases. Second, we find that riskaverse firms are less likely to decrease their export market participation when responding to macroeconomic uncertainty. Thus, risk-averse firms are more likely to diversify their domestic risk by participating in foreign markets in responding to macroeconomic uncertainty.
    Keywords: Exports,Risk aversion,Uncertainty,Firm heterogeneity
    Date: 2019–05
  9. By: Sarah Guillou (Observatoire français des conjonctures économiques); Tania Treibich (Observatoire français des conjonctures économiques)
    Abstract: The objective of this paper is to show that part of the fixed cost of a firm’s trade expansion is due to the acquisition of new internal capabilities (e.g., technology, production processes or skills), which implies a costly change in the firm’s internal labor organization. We investigate the relationship between a firm’s labor structure, in terms of the relative number of managers, and the scope of its export portfolio, in terms of its product-destination varieties. The empirical analysis is based on a matched employer-employee dataset covering the population of French firms from tradable sectors over the period 2009-2015. Our analysis suggests that market ex- pansion, both through export entry and export diversification, is associated with a change in the firm’s workforce composition, namely an increase in the number of managerial layers. These results are generally confirmed with the use of an instrumental variable approach to control for reverse causality. We show how these results are consistent with a simple model, where the complexity of a firm’s operations increases with the number of product-destination couples ex- ported and the manager’s role is to address the unsolved problems arising from such increased operational complexity.
    Keywords: Exports diversification; Managers; Occupations; Employer-employee data
    JEL: F16 E24 C14 D20
    Date: 2019–06
  10. By: Giannis Karagiannis (University of Macedonia, Department of Economics); Magnus Kellermann (The Bavarian State Research Center for Agriculture); Klaus Salhofer (University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development)
    Abstract: We decompose aggregate industry labor productivity growth into seven distinct components: input deepening, technical change, technical efficiency, scale effect, between-firm reallocation, effects from exits and entry. The first four components measure the productivity growth within a firm. The latter three components capture industry dynamics. Applied to a sample of 118 small and medium sized breweries in Germany over 13 years, we found that within-firm effects, in particular technical change and the scale effect, clearly dominated the effects from industry restructuring.
    Keywords: labor productivity, productivity growth, structural change, brewing industry, Germany
    JEL: D24 J24 L16 O12
    Date: 2019–06
  11. By: Osnat Zohar (Bank of Israel)
    Abstract: Real activity as well as expectations often exhibit asymmetric dynamics, namely, they increase gradually with occasional large downturns. Such dynamics emerge in a model with strong feedback between activity and information. In the model, active investment reveals private information about the state of the world. An agent (Follower) only learns about another agent's (Loner's) signals from his actions. Equilibrium in the model generates asymmetric cycles: Entry to the market is gradual; exits tend to be abrupt and are followed by slow recoveries. The asymmetry in the cycle is magnified when information is public. If Follower observes Loner's payoffs and not just his actions, he is more likely to defer his entry compared to the benchmark model. Finally, model simulations show a positive correlation between investment and dispersion of beliefs which is largely attributed to the learning mechanism in the model.​
    Keywords: dynamic learning, asymmetric cycles, slow recovery, private information
    JEL: C73 D82 D83 E32
    Date: 2019–05
  12. By: KIM YoungGak; INUI Tomohiko
    Abstract: Under the recent rapid development of production fragmentation across countries, there is a growing number of studies that examines the effect of international outsourcing and offshoring decisions on the domestic operations of firms. According to the Global Value Chain Index (GVCI) developed by OECD, the participation rate of Japanese firms in global value chains increased from 29.3 % in 1995 to 47.7% in 2007. RIETI-TID database shows that Japanese parts and product imports from China increased from 5.8 billion US dollars in 2000 to 25.0 billion US dollars in 2016. This paper examines the effect of increases in imported intermediate input use goods on firm outcomes, especially exports. First, we examine the effect on firm productivity, and we find a positive relationship between increases in imported intermediate input use goods and productivity level. When we separate the analysis by import source regions, a positive relationship is observed from imports from North America and Europe, but no relationship is found in the case of imports from China. These results indicate that firms benefit from the technology spillover effects from the advanced countries by importing from them. Our analysis also indicates that the increase in imports supports the improvement of resource allocation within firms. Next, we analyze the effect of the increase of imported inputs on both extensive margin and intensive margin of firm exports, controlling for the productivity of firms and establishments, finding a positive relationship in both cases. These results imply that imported inputs have a positive impact on firm exports both through productivity improvement and reduced intermediate input price. We also examine the effect of imported inputs on the number of employees, but we find no significant effect.
    Date: 2019–03

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