nep-bec New Economics Papers
on Business Economics
Issue of 2020‒02‒17
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Declining Business Dynamism in Belgium By Gert Bijnens; Jozef Konings
  2. Investment behavior and firms' financial performance: A comparative analysis using firm-level data from the wine industry By Claudiu Albulescu
  3. The Dynamics of High-Growth Firms : Evidence from Tunisia By Marcio,Cruz; Baghdadi,Leila; Arouri,Hassen
  4. All on board? New evidence on board gender diversity from a large panel of European firms By Joanna Tyrowicz; Siri Terjesen; Jakub Mazurek
  5. Firm Growth through New Establishments By Dan Cao; Henry Hyatt; Toshihiko Mukoyama; Erick Sager
  6. Global Influences on Gender Inequality: Evidence from Female Employment in Korea By Jaerim Choi; Theresa M. Greaney
  7. The Aggregate Consequences of Default Risk: Evidence from Firm-level Data By Timothy J. Besley; Isabelle A. Roland; John Van Reenen
  8. Heterogeneous Effects of the de jure and de facto Business Environment : Findings from Multiple Data Sets on the Business Environment By Zhenwei Qiang,Christine; Wang,He; Xu,L. Colin
  9. Does FDI benefit incumbent SMEs?: FDI spillovers and competition effects at the local level By Alexander C. Lembcke; Lenka Wildnerova

  1. By: Gert Bijnens; Jozef Konings
    Abstract: Using 30 years of data from all for-profit firms incorporated in Belgium, we show that business dynamism and entrepreneurship have been declining over recent decades. This decline set in around the year 2000 following a decade of declining start-up rates. We also observe a decreasing share of young firms that become high-growth firms and more importantly a declining propensity for small (not necessarily young) firms to experience fast growth. Interestingly, a similar decline in business dynamism occurred in the U.S., where firms face a far less rigid institutional environment than in Belgium. These remarkable similarities suggest that global trends rather than country specific changes are at the basis of this evolution. We show evidence that points to the role of ICT intensity and in explaining the secular decline in business dynamism.
    Keywords: business dynamism, firm dynamics, firm growth, entry, reallocation, high-growth firms, high-impact firms
    JEL: D21 E24 J6 L25
    Date: 2018–10
  2. By: Claudiu Albulescu (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers)
    Abstract: This paper assesses the role of financial performance in explaining firms' investment dynamics in the wine industry from the three European Union (EU) largest producers. The wine sector deserves special attention to investigate firms' investment behavior given the high competition imposed by the latecomers. More precisely, we investigate how the capitalization, liquidity and profitability influence the investment dynamics using firm-level data from the wine industry from France (331 firms), Italy (335) firms and Spain (442) firms. We use data from 2007 to 2014, drawing a comparison between these countries, and relying on difference-and system-GMM estimators. Specifically, the impact of profitability is positive and significant, while the capitalization has a significant and negative impact on the investment dynamics only in France and Spain. The influence of the liquidity ratio is negative and significant only in the case of Spain. Therefore, we notice different investment strategies for wine companies located in the largest producer countries. It appears that these findings are in general robust to different specifications of liquidity and profitability ratios, and to the different estimators we use.
    Keywords: firm investment,financial performance,wine industry,comparative analysis
    Date: 2020–01–27
  3. By: Marcio,Cruz; Baghdadi,Leila; Arouri,Hassen
    Abstract: This paper examines the dynamics and characteristics of high-growth firms in Tunisia. Further knowledge about the dynamics of these firms can inform the design of business support policies, especially toward small and medium-size firms. The analysis suggests that between 1999 and 2015, about 9 to 10.5 percent of the firms in Tunisia achieved high-growth status per year, on average, depending on the definition used, and these shares have been remarkably stable over time. Although a small share of firms achieves high growth annually, almost one in every three firms that survive for more than a decade has achieved high-growth status at least once. High-growth status is more prevalent among small and young firms, as well as firms that export, import, or receive foreign direct investments.
    Date: 2020–02–10
  4. By: Joanna Tyrowicz (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Siri Terjesen (Florida Atlantic University); Jakub Mazurek (FAME|GRAPE)
    Abstract: Using a unique database of over 20 million firms over two decades, we examine industry sector and national institution drivers of the prevalence of women directors on supervisory and management boards in both public and private firms across 41 advanced and emerging European economies. We demonstrate that gender board diversity has generally increased, yet women remain rare in both boards of firms in Europe: approximately 70% have no women directors on their supervisory boards, and 60% have no women directors on management boards. We leverage institutional and resource dependency theoretical frameworks to demonstrate that few systematic factors are associated with greater gender diversity for both supervisory and management boards among both private and public firms: the same factor may exhibit a positive correlation to a management board, and a negative correlation to a supervisory board, or vice versa. We interpret these findings as evidence that country-level gender equality and cultural institutions exhibit differentiated correlations with the presence of women directors in management and supervisory boards. We also find little evidence that sector-level competition and innovativeness are systematically associated with the presence of women on either board in either group of firms.
    Keywords: : female directors, glass ceiling, gender board diversity, institutional theory, resource dependency theory
    JEL: J7 P5
    Date: 2019–04
  5. By: Dan Cao (Department of Economics, Georgetown University); Henry Hyatt (Center for Economic Studies, U.S. Census Bureau); Toshihiko Mukoyama (Department of Economics, Georgetown University); Erick Sager (Division of Research and Statistics, Federal Reserve Board)
    Abstract: This paper analyzes the distribution and growth of firm-level employment along two margins: the extensive margin (the number of establishments in a firm) and the intensive margin (the number of workers per establishment in a firm). We utilize administrative datasets to document the behavior of these two margins in relation to changes in the U.S. firm-size distribution. In the cross section, we find the firm-size distribution, as well as both extensive and intensive margins, exhibits a fat tail. The increase in average firm size between 1990 and 2014 is primarily driven by an expansion along the extensive margin, particularly in very large firms. We develop a tractable general-equilibrium growth model with two types of innovations: external and internal. External innovation leads to the extensive margin of firm growth, and internal innovation leads to intensive-margin growth. The model generates fat-tailed distributions in firm size, establishment size, and the number of establishments per firm. We estimate the model to uncover the fundamental forces that caused the distributional changes from 1995 to 2014. The largest contributors to the increase in the number of establishments per firm are the external innovation cost and the decline in establishment exit rate. Classification-JEL E24, J21, L11, O31
    Keywords: firm growth, firm-size distribution, establishment, innovation
    Date: 2020–01–31
  6. By: Jaerim Choi (University of Hawai‘i at Manoa); Theresa M. Greaney (University of Hawaii at Manoa)
    Abstract: Do multinational enterprises (MNEs) from more gender-equal countries bring gender-equal employment practices with them to a less gender-equal host country? Using difference-in-differences, nearest-neighbor-matching, and event study techniques along with firm-level data for Korea, a country with low gender equality, we find evidence that MNEs bring their country of origin’s gender norms in employment with them. Korean firms that switch to majority foreign ownership report 2 to 12 percentage-points higher female shares of permanent main-task workers at firm headquarters compared with non-acquired firms and the differential increases with the level of gender equality in the MNEs’ home countries. We estimate that 1 to 7 percent of the productivity increase caused by foreign acquisition can be attributed to workforce reorganization that may reduce gender-based misallocations of talent.
    Keywords: Gender inequality, Foreign ownership
    JEL: J16 F23
    Date: 2020–01
  7. By: Timothy J. Besley; Isabelle A. Roland; John Van Reenen
    Abstract: This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of credit contracts with moral hazard, we show that a firm’s probability of default is a sufficient statistic for capital allocation. The theoretical framework suggests an aggregate measure of the impact of credit market frictions based on firm-level probabilities of default which can be applied using data on firm-level employment and default risk. We obtain direct estimates of firm-level default probabilities using Standard and Poor’s PD Model to capture the expectations that lenders were forming based on their historical information sets. We implement the method on the UK, an economy that was strongly exposed to the global financial crisis and where we can match default probabilities to administrative data on the population of 1.5 million firms per year. As expected, we find a strong correlation between default risk and a firm’s future performance. We estimate that credit frictions (i) cause an output loss of around 28% per year on average; (ii) are much larger for firms with under 250 employees and (iii) that losses are overwhelmingly due to a lower overall capital stock rather than a misallocation of credit across firms with heterogeneous productivity. Further, we find that these losses accounted for over half of the productivity fall between 2008 and 2009, and persisted for smaller (although not larger) firms
    JEL: D24 E32 L11 O47
    Date: 2020–01
  8. By: Zhenwei Qiang,Christine; Wang,He; Xu,L. Colin
    Abstract: Using multiple sources of national- and firm-level data around the world, this paper investigates how the effects of the business environment depend on whether the measure is de jure or de facto, and how business environment effects differ by ownership and size. The paper compares estimates of business environment effects from three data sources, and modifies the priors on the relative importance of various elements of the business environment. Among four aspects of the business environment, at least two sets are robust and a third set does not contradict the other two: access to finance, electricity, internet, and human capital. The effects of de jure business environment indicators on firm performances depend on measures of contract enforcement. Foreign-owned firms benefit more from the maintenance of physical safety and ease in obtaining construction permits, and gain competitive advantage in productivity when domestic infrastructure or access to finance is worse. Relatively small firms benefit more from corruption control, basic and modern infrastructure, human capital, and land access. Relatively large firms benefit more from physical safety. Access to finance is important for the expansion of smaller firms and the productivity of large firms.
    Keywords: Business Environment,Access to Finance,Energy Policies&Economics,Labor Markets
    Date: 2020–01–21
  9. By: Alexander C. Lembcke; Lenka Wildnerova
    Abstract: That global networks provide positive externalities to participating firms is a well‑documented fact. Less is known about how the performance of non-participating firms, especially those that are small or medium-sized, changes with exposure to an increase in the presence of globally integrated firms in their vicinity. With global trade being dominated by large firms, the benefits for SMEs are often indirect, e.g. through input relationships with larger companies or through knowledge spillovers that facilitate the adoption of best practices in firms with access to globally integrated peers. This paper combines industry and regional exposure to global links in form of foreign ownership. It uses firm-level microdata for 13 OECD countries, allowing for local spillovers (or crowding out) within the same industry and across industries. Foreign investment in the firm in the same region is associated with increasing productivity of local firms, especially in form of cross-sector externalities. Horizontal (same sector) externalities are negative, especially if they are coming from foreign firms locating in distanced regions. FDI tends to be associated with employment decline in manufacturing firms, but some growth in small firms.
    Keywords: Employment, FDI, Firms, Productivity, SME
    JEL: D22 F14 F23 F21 R12
    Date: 2020–02–12

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