nep-bec New Economics Papers
on Business Economics
Issue of 2020‒01‒06
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Trade Costs in Services. Firm Survival, Firm Growth and Implied Changes in Employment By Elisabeth Christen; Michael Pfaffermayr; Yvonne Wolfmayr
  2. Ceo pay in perspective By Boyer, Marcel
  3. High-Skill Migration, Multinational Companies, and the Location of Economic Activity By Nicolas Morales
  4. Strategic CSR for innovation in SMEs: Does diversity matter? By Rachel Bocquet; Christian Le Bas; Caroline Mothe; Nicolas Poussing
  5. Employment protection and firm-level job reallocation: Adjusting for coverage By Marzinotto, Benedicta; Wintr, Ladislav
  6. Wholesale firms: A catalyst for Swedish exports? By Daunfeldt, Sven-Olov; Engberg, Erik; Halvarsson, Daniel; Kokko, Ari; Tingvall, Patrik
  7. CEO human capital and venture capital investment duration: Evidence from French IPOs By Sophie Pommet; Jean-François Sattin
  8. Shocks to Supply Chain Networks and Firm Dynamics: An Application of Double Machine Learning By MIYAKAWA Daisuke
  9. Basic values and entrepreneurial behaviour in family and non-family small and medium-sized firms By Gergely Farkas; Éva Málovics; Beáta Kincsesné Vajda
  10. Technology Adoption and Value Chains in Developing Countries: Panel Evidence from Dairy in Punjab By Saule Burkitbayeva; Emma Janssen; Jo Swinnen
  11. The Firm's Role in Displaced Workers' Earnings Losses By Brendan Moore; Judith Scott-Clayton

  1. By: Elisabeth Christen; Michael Pfaffermayr; Yvonne Wolfmayr
    Abstract: This paper provides new insight into the firm-level employment impacts of trade cost changes at the industry level in the Austrian services sector. We apply a two-part model of firm survival (exit) and firm growth. Separate regressions for firm entry rates at the industry-region level complete the picture of total trade-induced net job creation. We implement the trade cost measure introduced by Chen and Novy (2011) and base it on own estimates of industry specific substitution elasticities. Falling trade costs in the Austrian services sector over the period 2000 to 2014 resulted in net job creation of about 19,000 jobs accounting for 9.5 percent of overall job flows in the sector. The smallest and least productive firms contract while large and productive firms expand as predicted by theory. Most adjustments occur at the extensive margin due to changes in the probability of firm survival.
    Keywords: Services trade, Trade costs, Elasticity of substitution, Firm-level evidence, Heterogenous firms, Gravity model, Job flows, Trade and employment
    Date: 2019–12–18
  2. By: Boyer, Marcel
    Abstract: The CEO pay ratio, measured as the ratio of CEO pay over the median salary of a firm’s employees, is the most often quoted number in the popular press. This ratio has reached 281 this last year for S&P500 firms, the largest US firms by capitalization (as of November 21 2019). But the B-ratio I proposed here, measured as the CEO pay over the total payroll of the firm, relates CEO pay to the salary of each employee and may be the most relevant and informative figure on CEO pay as perceived by the firm’s employees hemselves. How much a typical employee of the S&P500 firms implicitly “contributes” to the salary of his/her CEO? An amount of $273 on average or 0.5% of one’s salary, that is, one half of one percent on an individual salary basis. To assess whether such a contribution is worthwhile, one must determine the value of the CEO for the organization and its workers and stakeholders. The Appendix provides the data for all 500 firms regrouped in 10 industries (Bloomberg classification).
    Date: 2019–12
  3. By: Nicolas Morales
    Abstract: This paper examines the relationship between high-skill immigration and multinational activity. I assemble a novel firm-level dataset on high-skill visa applications and show that there is a large home-bias effect. Foreign multinational enterprises (MNEs) in the US tend to hire more migrant workers from their home countries compared to US firms. To quantify the general equilibrium implications for production and welfare, I build and estimate a quantitative model that includes trade, MNE production, and the migration decisions of high-skill workers. I use an instrumental variables approach to show that the relationship between immigration and MNEs proposed by the model holds in the data. The model is then used to run two counterfactual exercises. The first, evaluates the implications of a more restrictive immigration policy in the US. I find that MNEs play a significant role in how immigration affects the location of production and welfare. In the second counterfactual exercise, I increase the barriers to MNE production to calculate the welfare gains generated by MNEs. I show that a model not incorporating migration would overestimate the MNE welfare gains for high-skill workers by 35% and underestimate welfare gains for low-skill workers by 8%.
    Keywords: H-1B visas; IT sector; Multinational companies; High-skill immigration
    JEL: F16 F22 F23 J61
    Date: 2019–12–17
  4. By: Rachel Bocquet (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Christian Le Bas (ESDES - École de management de Lyon - Université Catholique de Lyon); Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Nicolas Poussing (LISER - Luxembourg Institute of Socio-Economic Research - Luxembourg Institute of Socio-Economic Research)
    Abstract: Both corporate social responsibility and diversity influence firms' innovation, yet their relationship and links to innovation remain uncertain, especially among small to medium-sized enterprises. Relying on strategic and institutional CSR perspectives and a value-in-diversity approach, this study examines the mediating roles of gender and nationality diversity on the CSR–innovation link at the organizational level. With a sample of 1,348 SMEs from Luxembourg, the results show that strategic CSR can promote both types of diversity, but only nationality diversity triggers technological innovation. Nationality diversity emerges as a partial mediator of the relationship between CSR and SMEs' technological innovation. Thus, strategic CSR, through the genuine pursuit of such diversity, can help SMEs attain positive returns on their product or process innovation. These results have important theoretical and managerial implications.
    Keywords: strategic CSR,diversity,gender,innovation,nationality,responsive CSR
    Date: 2019
  5. By: Marzinotto, Benedicta; Wintr, Ladislav
    Abstract: This paper finds that employment protection legislation (EPL) had a significant impact on employment adjustment in Europe over 2001-2013, once we account for firm-size related exemptions to EPL. We construct a novel coverage-adjusted EPL indicator and find that EPL hinders employment growth at the firm level and increases the share of firms that remain in the same size class. This suggests that stricter EPL restrains job creation because firms fear the costs of shedding jobs during downturns. We do not find evidence that EPL has positive effects on employment by limiting job losses after adverse shocks. In addition to standard controls for the share of credit-constrained firms and the position in the business cycle, we also control for sizerelated corporate tax exemptions and find that these also significantly constrain job creation among incumbent firms.
    Keywords: employment protection,firm growth,job reallocation
    JEL: D22 J08
    Date: 2019
  6. By: Daunfeldt, Sven-Olov (HUI Research); Engberg, Erik (Growth Analysis); Halvarsson, Daniel (The Ratio Institute); Kokko, Ari (Copenhagen Business School); Tingvall, Patrik (Growth Analysis)
    Abstract: This paper examines the role of wholesale firms as facilitators of exports for small and medium-sized Swedish businesses. Our findings suggest that wholesale firms do facilitate access to difficult markets located outside Europe. For exports of a particular good to a given market, we observe a positive correlation between the export volumes of wholesale and manufacturing firms. Finally, we present evidence that supports a prediction from recent trade models with differentiated firms, namely that wholesale firms can facilitate exports for firms that are not themselves capable of direct exports.
    Keywords: Trade; Wholesale; Intermediation; Productivity; Manufacturing; Institutions
    JEL: D22 F14 F18
    Date: 2019–12–20
  7. By: Sophie Pommet (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur); Jean-François Sattin (Prism - PRISM - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Panthéon-Sorbonne, Université Paris 1 Panthéon-Sorbonne - [-])
    Abstract: The duration of the VC incubation period is an important parameter for the profitability of venture capital (VC) firms. This paper uses a new database of VC-backed initial public offerings (IPOs) that are listed on French financial markets in order to highlight the importance of chief executive officer (CEO) human capital on the duration of the VC incubation period prior to the IPO. By using a duration model (Weibull model) we find that while CEOs' previous academic, technical and managerial experiences seem not to affect the timing of an IPO, the CEOs' entrepreneurial background is strongly negatively correlated to the duration of VC investment (it increases the hazard ratio by more than 100%) and thus fosters IPO exit. We thank the two anonymous referees for helpful comments on this work. Responsibility for any errors lies solely with the authors.
    Date: 2019
  8. By: MIYAKAWA Daisuke
    Abstract: We examine the association between changes in supply chain networks and firm dynamics. To determine the causal relationship, first, using data on over a million Japanese firms, we construct machine learning-based prediction models for the three modes of firm exit (i.e., default, voluntary closure, and dissolution) and firm sales growth. Given the high performance in those prediction models, second, we use the double machine learning method (Chernozhukov et al. 2018) to determine causal relationships running from the changes in supply chain networks to those indexes of firm dynamics. The estimated nuisance parameters suggest, first, that an increase in global and local centrality indexes results in lower probability of exits. Second, higher meso-scale centrality leads to higher probability of exits. Third, we also confirm the positive association of global and local centrality indexes with sales growth as well as the negative association of a meso-scale centrality index with sales growth. Fourth, somewhat surprisingly, we found that an increase in one type of local centrality index shows a negative association with sales growth. These results reconfirm the already reported correlation between the centrality of firms in supply chain networks and firm dynamics in a causal relationship and further show the unique role of centralities measured in local and medium-sized clusters.
    Date: 2019–12
  9. By: Gergely Farkas (University of Szeged, Faculty of Economics and Business Administration); Éva Málovics (University of Szeged, Faculty of Economics and Business Administration); Beáta Kincsesné Vajda (University of Szeged, Faculty of Economics and Business Administration)
    Abstract: We used the Schwartz theory of basic values to examine the effect of them on entrepreneurial behaviour. According to the literature, family businesses tend to act in business based on family values. In non-family business, the connection between the leader?s values and the organizational values is less tight. We measured entrepreneurial behaviour with Entrepreneurial Orientation (EO), Learning Orientation (LO), Growth Orientation (GO), and three more dimensions about how the entrepreneurs connect to their business environment. The study used survey method and reached 298 small and medium-sized firms in the Southern Great Plain region of Hungary.Results show that family and non-family entrepreneurs only differ in conservation values (security, conformity, tradition). This is a well-known difference in the literature. However, our primary goal was to compare groups of family and non-family entrepreneurs when a quadrant of the basic value model has a higher or lower value than the median of the sample. This way, we found, those family businesses with a high value of openness to change (stimulation, self-direction) have higher EO and GO. Both groups with a high value of self-transcendence have higher LO. Family firms with high conservation values have higher LO; meanwhile, in non-family businesses, the higher openness to change is associated with higher LO. We expected higher self-enchantment (achievement, power, hedonism) might lead to higher EO, but it stands only for family firms.The pattern of connection of basic values and behaviour differs in the case of family and non-family firms. Our study confirms that the effect of leader?s basic values is less visible on entrepreneurial behaviour in case of non-family firms, but it exists. In case of family firms, the higher conservation values benefit as higher EO and LO and more intense networking in behaviour.
    Keywords: Entrepreneurial Orientation, Learning Orientation, Growth Orientation, family business
    JEL: L26 O30 D23
    Date: 2019–10
  10. By: Saule Burkitbayeva; Emma Janssen; Jo Swinnen
    Abstract: The adoption of modern technologies in agriculture is crucial for improving the productivity and welfare of poor farmers in developing countries. Not much is known about how value chains do (not) affect technology transfer and/or adoption in domestic food chains in developing countries. Our paper analyzes farm-level technology adoption in the dairy chain in Punjab, India, combining quantitative panel data from representative surveys in 2008 and 2015 with data from targeted interviews with emerging modern dairy farms. Between 2008 and 2015 there were important increases in technology adoption in the form of better hygienic practices, better feed and improved livestock among traditional dairy farms. Especially those farms which lagged behind in 2008 improved their technology. However, the role of vertical coordination in value chains in stimulating technology adoption among these traditional dairy farmers seems to be minor. In contrast, we document the emergence of a group of dynamic modern dairy farms which are much larger, only use modern technology, and are fully integrated in vertically coordinated value chains which support these modern farms' management and investments.
    Date: 2019–01
  11. By: Brendan Moore; Judith Scott-Clayton
    Abstract: We use employer-employee matched administrative data from Ohio to study the role of firm pay premiums in explaining the large, persistent earnings losses of displaced workers. We estimate that earnings for displaced workers from the mid-2000s are depressed by 22 percent after four years, consistent with prior work. Drawing upon empirical approaches from the displaced worker and firm heterogeneity literature, we then estimate how much of this earnings loss can be explained by the forfeiture of a favorable employer-specific pay premium. Our preferred estimate attributes one quarter (24 percent) of long-run earnings deficits to lost firm pay premiums. Such firm rents explain up to half the earnings deficits for those laid off from manufacturing firms and employers with particularly generous pay policies. We test for sensitivity to different samples from which we derive firm specific-pay premiums and definitions of displacement. Our estimates persist in a narrow range between 16 and 24 percent for the share explained by firm rents, adding to the evidence that firm rents do not explain the majority of earnings or wage losses sustained by displaced workers in the United States.
    JEL: J31 J63 J65
    Date: 2019–12

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