nep-bec New Economics Papers
on Business Economics
Issue of 2020‒03‒02
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Corporate boards, interorganizational ties and profitability: The case of Japan By Raddant, Matthias; Takahashi, Hiroshi
  2. Casting a Shadow : Productivity of Formal Firms and Informality By Amin,Mohammad; Ohnsorge,Franziska Lieselotte; Okou,Cedric Iltis Finafa
  3. Testing the Superstar Firm Hypothesis By Alexander Schiersch; Caroline Stiel
  4. The Extent of Engagement in Global Value Chains by Firms in Rwanda By Frazer,Garth; Van Biesebroeck,Johannes
  5. Mixed Bundling in Oligopoly Markets By Zhou, Jidong
  6. Between Firm Changes in Earnings Inequality: The Dominant Role of Industry Effects By John Haltiwanger; James R. Spletzer
  7. Labor Income Share at the Firm Level: Global Trends By Paul, Saumik; Isaka, Hironobu
  8. Firms’ Asset Holdings and Inflation Expectations By Saten Kumar
  9. Management Capabilities and Performance of Firms in the Russian Federation By Grover,Arti Goswami; Torre,Ivan
  10. Imports and Credit Rationing: A Firm-Level Investigation By Francesco Nucci; Filomena Pietrovito; Alberto Franco Pozzolo

  1. By: Raddant, Matthias; Takahashi, Hiroshi
    Abstract: We analyze the ties between 4,000 Japanese corporations in the time period from 2004 until 2013. We combine data about the board composition with ownership relationships and indicators of corporate profitability. We find that both the network of corporate board interlocks as well as the ownership network show a high degree of persistence. The overlap between these two networks is surprisingly small. In the analysis of the board composition we find that the number of outside board members is low yet increasing. Firms with large foreign shareholdership are at the forefront of this development. Upon retirement board members in central positions are replaced with similarly central executives, maintaining the general structure of the network. Women in corporate boards remain scarce. The connectivity of firms in the ownership and board network can be related to firm profitability. Firms that are linked to peers with above average profitability are likely more profitable than firms in other relationships.
    Keywords: corporate board interlock,firm performance,firm networks
    Date: 2020
  2. By: Amin,Mohammad; Ohnsorge,Franziska Lieselotte; Okou,Cedric Iltis Finafa
    Abstract: Using firm-level survey data for a large cross section of countries, the paper assesses the gap in labor productivity between formal and informal firms in developing countries for which comparable data are available. It also investigates the impact of competition from informal firms on the labor productivity of formal firms. The results show that on average, the labor productivity of informal firms is about one-fourth that of formal firms. Moreover, the labor productivity of formal firms that face competition from informal firms is about 75 percent of the average labor productivity of formal firms that do not experience informal competition. This suggests that competition from the informal sector can erode formal firms'market share and the resources available to boost productivity where formal firms shoulder the additional cost of regulatory compliance. These findings are robust to a range of firm and country characteristics as well as checks for endogeneity concerns.
    Keywords: Labor Markets,Employment and Unemployment,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Food&Beverage Industry,Common Carriers Industry,Construction Industry,General Manufacturing,Educational Sciences
    Date: 2019–07–22
  3. By: Alexander Schiersch; Caroline Stiel
    Abstract: The superstar firms model provides a compelling explanation for two simultaneously occurring phenomena: the rise of concentration in industries and the fall of labor shares. Our empirical analysis confirms two of the underlying assumptions of the model: the market share increases and the labor share decreases with increasing firm-level total factor productivity, providing support for the superstar firms’ hypothesis. However, we find no evidence for the underlying mechanism of the model, the distribution of fixed labor costs. Instead, we observe increasing returns to scale that also explain lower labor shares of larger firms.
    Keywords: superstar firms, total factor productivity, labor share, market share, firm size
    JEL: D24 E20 L11
    Date: 2020
  4. By: Frazer,Garth; Van Biesebroeck,Johannes
    Abstract: Using administrative data for an exhaustive sample of formally registered firms, reveals that the engagement of Rwandan firms in global value chains (GVCs) is remarkably limited. The paper documents several patterns of firm-level exports and compares firm characteristics between exporters and non-exporters. It also illustrates which firm-level characteristics are good predictors for a variety of extensive margins of export and import activities. The analysis includes firms from three goods-producing sectors, agriculture, mining, and manufacturing, but focuses mostly on manufacturing firms. The results indicate large differences between small and large exporters in terms of export market participation, type of products exported, and destinations served. GVC engagement has increased over the 2008-2016 sample period, especially for manufacturing firms, but this is a slow process with frequent set-backs.
    Keywords: Construction Industry,Common Carriers Industry,Food&Beverage Industry,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,General Manufacturing,Pulp&Paper Industry,Textiles, Apparel&Leather Industry,Mining&Extractive Industry (Non-Energy),Food Security,International Trade and Trade Rules
    Date: 2019–08–13
  5. By: Zhou, Jidong
    Abstract: This paper provides a framework for studying competitive mixed bundling with an arbitrary number of firms. We examine both a firm's incentive to introduce mixed bundling and equilibrium tariffs when all firms adopt the mixed-bundling strategy. We develop a method to derive the equilibrium prices, and also offer a simple approximation of the equilibrium prices when the number of firms is large. In the duopoly case, relative to separate sales, mixed bundling has ambiguous impacts on prices, profit and consumer surplus. While with many firms mixed bundling lowers all prices, harms firms and benefits consumers under a mild condition.
    Keywords: bundling, multiproduct pricing, oligopoly
    JEL: D43 L13 L15
    Date: 2019–11
  6. By: John Haltiwanger; James R. Spletzer
    Abstract: We find that most of the rising between firm earnings inequality that dominates the overall increase in inequality in the U.S. is accounted for by industry effects. These industry effects stem from rising inter-industry earnings differentials and not from changing distribution of employment across industries. We also find the rising inter-industry earnings differentials are almost completely accounted for by occupation effects. These results link together the key findings from separate components of the recent literature: one focuses on firm effects and the other on occupation effects. The link via industry effects challenges conventional wisdom.
    Date: 2020–02
  7. By: Paul, Saumik (Newcastle University); Isaka, Hironobu (Japan International Cooperation Agency)
    Abstract: Micro-level studies provide insightful knowledge on the drivers of the labor income share. This paper introduces a novel firm-level dataset on the labor income share. Using the World Bank Enterprise Survey data, we put together an unbalanced panel comprising 146,666 firms from 139 countries and spanning a period from 2002 to 2017. We define the firm-level labor income share following three alternative approaches and compare these estimates across income groups, regions, firm sizes, and ownership types. The estimates average around .45, with considerable variations across regions and firm characteristics. Manufacturing firms tend to have a lower labor income share as the firm size increases. Large firms in services, both foreign and state-owned, pay a higher share of income to laborers. Regression results indicate that laborers in more productive firms enjoy a lower share of income; however, we do not find any strong correlation between globalization and the labor income share at the firm level.
    Keywords: labor income share, cross-country data, income distribution
    JEL: E24 E25 J30
    Date: 2019–12
  8. By: Saten Kumar (School of Economics, Auckland University of Technology)
    Abstract: This paper investigates the relationship between firms’ inflation expectations and their holdings of liquid assets. We implement a new quantitative survey of firms’ expectations about inflation in New Zealand. We find that firms that hold more shares of liquid assets systematically report lower inflation expectations. Moreover, we implement an experiment by providing firms new exogenous information about recent inflation dynamics. This experiment allows us to assess how firms respond to new information in terms of belief revisions and firm-level decisions.
    Keywords: liquid assets, illiquid assets, expectations, survey, inattention
    JEL: E2 E3
    Date: 2020–01
  9. By: Grover,Arti Goswami; Torre,Ivan
    Abstract: Using the management and operational practices survey in the Russian Federation, this paper finds that an average Russian manufacturing firm adopts 43 percent of the structured management practices (a score of 0.43), a value that is far from the frontier (for example, the United States scores 0.62). This average mask the wide heterogeneity in practices, where a large share of firms adopt few structured management practices and only 3.5 percent of them have a score over 0.75. Consistent with the findings in other countries, better managed firms in Russia show stronger firm performance, measured as gross revenue per employee, value added per employee, total factor productivity, and employment growth. Improving the management score from the 10th to the 90th percentile is associated with an increase in sales per worker by 87 percent, value added per worker by 30 percent, and total factor productivity by 13.5 percent. What drives better management capabilities? Russian firms are similar to those in other countries, such that exporters and firms with foreign linkages are better managed. Switching from operating purely in the domestic market to being globally linked is associated with a significant increase in management capabilities. However, unlike the results in other countries, management capabilities in Russia are not associated with firm age, implying that firms do not learn to be better managed over their life cycle. This result points to the possibility of inefficient allocation of resources, such that learning and selection mechanism does not weed out the badly managed firms, perhaps due to the lack of pro-competitive forces.
    Date: 2019–09–04
  10. By: Francesco Nucci (Sapienza University); Filomena Pietrovito (University of Molise); Alberto Franco Pozzolo (Roma Tre University and Centro Studi Luca d’Agliano)
    Abstract: Firm performance is known to benefit from participation in import markets. For this reason, understanding whether credit constraints hamper firms’ ability to purchase foreign inputs is a relevant issue. In this paper, we investigate the relationship between financial constraints and imports of intermediate inputs using a large sample of small- and medium-sized enterprises from 66 developing countries. To measure credit constraints we use information from a firm’s in-depth self-assessment of its difficulties in having access to external finance. Furthermore, to tackle the endogeneity problems in the estimation, we rely on an instrumental variable approach that allows us to establish more directly the impact of financial constraints on importing activities. We provide robust evidence of a statistically and economically significant restraining effect of credit constraints on both the probability of importing intermediates (the extensive margin) and the incidence of imported intermediates in total input expenditure (the intensive margin). Moreover, we show that the impact on these margins of import is stronger for firms operating in countries where the financial system is less developed, the quality of institutions poorer and the overall level of economic freedom lower.
    Keywords: import market participation; import margins; credit constraints.
    JEL: D22 F10 F14 F23 M21
    Date: 2020–02–25

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