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on Business Economics |
| By: | Pedro Bento; Diego Restuccia |
| Abstract: | A decline in the net entry rate of employer firms in the United States in the last decades, a decline in business dynamism, may explain the observed productivity slowdown. We consider the role of nonemployers, businesses without paid employees, in business dynamism and aggregate productivity. Despite the decline in the growth of employer firms, the total number of firms has increased since the early 1980s, which in the context of a standard model of firm dynamics implies an average annual growth of aggregate productivity of 0.26-0.39\%, over one quarter of the productivity growth in the data. |
| Keywords: | nonemployers, employer firms, business dynamism, productivity, TFP. |
| JEL: | O4 O51 E1 |
| Date: | 2020–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-654&r=all |
| By: | Krüger, Miriam; Kinne, Jan; Lenz, David; Resch, Bernd |
| Abstract: | In this paper, we introduce the concept of a Digital Layer to empirically investigate inter-firm relations at any geographical scale of analysis. The Digital Layer is created from large-scale, structured web scraping of firm websites, their textual content and the hyperlinks among them. Using text-based machine learning models, we show that this Digital Layer can be used to derive meaningful characteristics for the over seven million firm-to-firm relations, which we analyze in this case study of 500,000 firms based in Germany. Among others, we explore three dimensions of relational proximity: (1) Cognitive proximity is measured by the similarity between firms' website texts. (2) Organizational proximity is measured by classifying the nature of the firms' relationships (business vs. non-business) using a text-based machine learning classification model. (3) Geographical proximity is calculated using the exact geographic location of the firms. Finally, we use these variables to explore the differences between innovative and non-innovative firms with regard to their location and relations within the Digital Layer. The firm-level innovation indicators in this study come from traditional sources (survey and patent data) and from a novel deep learning-based approach that harnesses firm website texts. We find that, after controlling for a range of firm-level characteristics, innovative firms compared to non-innovative firms maintain more numerous relationships and that their partners are more innovative than partners of non-innovative firms. Innovative firms are located in dense areas and still maintain relationships that are geographically farther away. Their partners share a common knowledge base and their relationships are business-focused. We conclude that the Digital Layer is a suitable and highly cost-efficient method to conduct large-scale analyses of firm networks that are not constrained to specific sectors, regions, or a particular geographical level of analysis. As such, our approach complements other relational datasets like patents or survey data nicely. |
| Keywords: | Web Mining,Innovation,Proximity,Network,Natural Language Processing |
| JEL: | O30 R10 C80 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20003&r=all |
| By: | Peter Maniloff (Division of Economics and Business, Colorado School of Mines); Daniel T. Kaffine (Department of Economics, University of Colorado Boulder) |
| Abstract: | The traditional theory of firm regulation and enforcement examines the interplay of firms and regulator, with citizens as passive consumers of goods or providers of votes. However, in industries such as oil and gas, citizens can play an important role in inspections and enforcement, which we analyze with a novel dataset of Colorado regulatory activities. We find regulators frequently conduct follow-up inspections of citizen complaints, and these citizen-driven inspections are just as likely to lead to regulatory action as ``normal'' scheduled inspections. However, the evidence is consistent with regulators treating these complaints as ``one-offs'' --- regulators do not increase inspection activity of other wells owned by a firm that was complained about. An inspector conducting a complaint inspection crowds out two regular inspections at the daily level, but we find no evidence of crowd-out at time scales of one month or greater. Finally, heterogeneity across complaint types suggests citizens are particularly adept at identifying nuisance-related violations (e.g. noise, smell), but are less adept at identifying more technical violations. |
| Keywords: | enforcement, oil and gas, citizen participation |
| JEL: | Q58 Q48 K42 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp202001&r=all |
| By: | Serguey Braguinsky; Atsushi Ohyama; Tetsuji Okazaki; Chad Syverson |
| Abstract: | We explore how firms grow by adding products. In contrast to most earlier work on the topic, our conceptual and empirical framework allows for separate treatment of product innovation (vertical differentiation) and diversification (horizontal differentiation). The market context is Japan’s cotton spinning industry at the turn of the last century. We find that introducing innovative products outside of the previously feasible set involves removing the “supply-side constraint” by investing in new types of machines and technologies. This process involves a high degree of uncertainty, however, so firms that take steps in this direction tend to first introduce innovative products on experimental basis. We show that conducting such experiments is a key to firm growth. It not only provides opportunities to capture the market in high-end vertically differentiated products when successful, but also facilitates horizontal differentiation of the firm’s products within its previous technical capabilities. In long-term outcomes over 20 years, the right tail of the firm size distribution becomes dominated by firms that were able to expand in both directions: moving first into technologically challenging vertically differentiated products, and then later applying their newly acquired high-end technical competence to horizontal expansion of their product portfolios. |
| JEL: | D2 L1 N6 N8 O3 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26665&r=all |
| By: | Stadler, Manfred |
| Abstract: | We analyze product market competition between firm owners where the risk-neutral workers decide on their efforts and, thereby, on the output levels. Various worker compensation schemes are compared: a piece-rate compensation scheme as a benchmark when workers' output performance is verifiable, and a contest-based as well as a tournament-based compensation scheme when it is only verifiable who the best performing worker is. According to optimal designs, all the considered compensation contracts lead to an equal market outcome. Therefore, it depends decisively on the relative costs of organizing a monitoring device, a contest, or a tournament whether the one or the other compensation scheme should be implemented. |
| Keywords: | worker compensation schemes,piece rates,contests,tournaments,product market competition |
| JEL: | C72 L22 M52 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:128&r=all |
| By: | Thomas Geelen (Copenhagen Business School - Department of Finance; Danish Finance Institute); Jakub Hajda (University of Lausanne; Swiss Finance Institute); Erwan Morellec (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute) |
| Abstract: | Recent empirical studies show that innovative firms heavily rely on debt financing. This paper investigates the relation between debt financing, innovation, and growth in a Schumpeterian growth model in which firms' dynamic R&D and financing choices are jointly and endogenously determined. The paper demonstrates that while debt hampers innovation by incumbents due to debt overhang, it also stimulates entry, thereby fostering innovation and growth at the aggregate level. The paper also shows that debt financing has large effects on firm entry, firm turnover, and industry structure and evolution. Lastly, it predicts substantial intra-industry variation in leverage and innovation, in line with the empirical evidence.. |
| Keywords: | debt, innovation, industry dynamics, growth |
| JEL: | G32 O30 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1979&r=all |
| By: | Myeongwan Kim |
| Abstract: | A key economic issue in Canada is the declining Business Enterprise Research and Development in manufacturing since the early 2000s. Accompanying this, the total factor productivity (TFP) growth in manufacturing slowed after 2000. However, there has not been a definitive explanation for these trends. To deepen our understanding of this phenomenon, we focus on the increasing Chinese import share in the total domestic absorption in Canadian manufacturing since the early 2000s, which appears to be driven by positive supply shocks within Chinese manufacturing. Based on a firm-level database covering all incorporated firms in Canadian manufacturing, we find that rising Chinese import competition led to declines in R&D expenditure and TFP growth within firms but reallocated employment towards more productive firms and induced less productive firms to exit. The negative within-effects were pronounced for firms that were initially smaller, less profitable, and less productive. These firms also experienced declines in their profit margins due to rising Chinese import competition while larger and better-performing firms did not. Our estimates imply that rising Chinese import competition can explain about 7 per cent of the total decline of $1.36 billion (2007 CAD) in R&D expenditure in Canadian manufacturing between 2005 and 2010. Although it led to declines in TFP within firms, the positive reallocation effects more than offset the negative within-effect. Had there been no increase in Chinese import competition between 2005 and 2010, TFP in Canadian manufacturing would have declined by 1.26 per cent per year instead of the actual 1.09 per cent per year over this period. |
| Keywords: | China Shock, Canada, Imports, Productivity, Innovation |
| JEL: | F62 O32 O51 O53 L60 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1903&r=all |
| By: | Guido Matias Cortes; Jeanne Tschopp |
| Abstract: | Wage inequality has risen in many countries over recent decades. At the same time, production has become increasingly concentrated in “superstar” firms. In this paper, we show that these two phenomena are linked. Theoretically, we show that shocks that increase concentration, such as an increase in consumers’ price sensitivity, will also lead to an increase in wage dispersion between firms. Empirically, we use industry-level data from 14 European countries over the period 1999–2016 and show robust evidence of a positive and statistically significant correlation between concentration and the dispersion of firm-level wages. |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp2001&r=all |
| By: | Muhammad Ejaz (State Bank of Pakistan); Muhammad Nadim Hanif (State Bank of Pakistan) |
| Abstract: | We identify private credit booms in Pakistan, using fully modified HP filter, and analyze the behavior of selected macroeconomic aggregates around these booms based on annual data over the period 1960-2018. We observe that credit booms are associated with economic expansions, increasing asset prices, appreciating REER and widening of current account deficit in Pakistan. Micro data analysis shows an association between credit booms and measures of corporate leverage, valuations and profitability. Our analysis of bank level data shows similar cyclical patterns in lending activity and profitability in banking system. Lastly, we find that credit booms in Pakistan are associated with sudden stops and currency crises but not with banking crisis. These results are in line with existing evidence on credit cycles’ dynamics in emerging markets. |
| Keywords: | Credit Booms, Business Cycles, Macroprudential Supervision |
| JEL: | E32 E51 G28 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:sbp:wpaper:101&r=all |
| By: | Taylor Webley; Carla Valerio; Maureen MacIsaac |
| Abstract: | Real growth in gross domestic product tends to be meaningfully higher when a large share of industries and demand components are growing—that is, when growth is broad across many fronts. We present a simple new indicator, the overall breadth indicator (OBI), to measure how widespread economic activity is in Canada, allowing us to place recent data in historical context. The relationship between the OBI and the output gap is strong contemporaneously and one quarter ahead. Beyond that, however, the signal from the OBI is less robust. |
| Keywords: | Business fluctuations and cycles |
| JEL: | E32 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocsan:20-1&r=all |
| By: | Lucas Figal Garone (IDB); Paula A. López Villalba (Universidad de San Andrés); Alessandro Maffioli (IDB); Christian A. Ruzzier (Universidad de San Andrés) |
| Abstract: | While the accumulation of factors of production, both physical and human capital, has helped Latin America and the Caribbean (LAC) to narrow the income gap with developed economies, aggregate productivity is still relatively low. Although there are numerous determinants of aggregate productivity, it is largely based on the underlying productivity of all firms in the economy. Using firm-level data from several waves of the World Bank Enterprise Survey and Chile’s National Manufacturing Survey, we explore the ‘what’ question on productivity dispersion in LAC. We document three stylized facts: (i) there are significant differences in firm productivity within industries – the firm at the 90th percentile of the productivity distribution produces almost seven times as much output (using the same measured inputs) as the 10th percentile firm; (ii) productivity differences persist over time – regressing a firm’s current productivity on its one-year lagged productivity yields an autoregressive coefficient of around 0.9; and (iii) most of the growth in aggregate productivity comes from improvements in the productivity of existing firms. Next, we discuss the factors that explain these persistent productivity differences – the ‘why’ question. We argue that the large productivity differences within industries can be traced back to differences in firm strategy and organization (internal factors), and in the environment in which firms operate (external factors). Finally, we review the existing empirical evidence on the impacts of these factors on firm-level productivity (with a focus on developing countries) and identify knowledge gaps and opportunities for public, private and institutional investments. |
| Keywords: | Aggregate productivity, firm-level productivity, TFP, Latin America and the Caribbean |
| JEL: | D24 L20 M20 O30 O47 O54 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:sad:wpaper:136&r=all |