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on Business Economics |
| By: | Iacovone,Leonardo; Maloney,William F.; Tsivanidis,Nick |
| Abstract: | This paper offers new evidence on the relationship between contractual institutions, family management, and aggregate performance. The study creates a new firm-level database on management and ownership structures spanning 134 regions in 11 European countries. To guide the empirical analysis, it develops a model of industry equilibrium in which heterogeneous firms decide between family and professional management when the latter are subject to contracting frictions. The paper tests the model's predictions using regional variation in trust within countries. Consistent with the model, the finding show that there is sorting of firms across management modes, in which smaller firms and those in regions with worse contracting environments are more likely to be family managed. These firms are on average 25 percent less productive than professionally managed firms, and moving from the country with the least reliable contracting environment to the most increases total factor productivity by 21.6 percent. Family management rather than ownership drives these results. |
| Date: | 2019–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:8803&r=all |
| By: | Aghion, Philippe; Bergeaud, Antonin; Lequien, Matthieu; Melitz, Marc |
| Abstract: | We analyze how demand conditions faced by a firm impacts its innovation decisions. To disentangle the direction of causality between innovation and demand conditions, we construct a firm-level export demand shock which responds to aggregate conditions in a firm’s export destinations but is exogenous to firm-level decisions. Using exhaustive data covering the French manufacturing sector, we show that French firms respond to exogenous growth shocks in their export destinations by patenting more; and that this response is entirely driven by the subset of initially more productive firms. The patent response arises 3 to 5 years after a demand shock, highlighting the time required to innovate. In contrast, the demand shock raises contemporaneous sales and employment for all firms, without any notable differences between high and low productivity firms. We show that this finding of a skewed innovation response to common demand shocks arises naturally from a model of endogenous innovation and competition with firm heterogeneity. The market size increase drives all firms to innovate more by increasing the innovation rents; yet by inducing more entry and thus more competition, it also discourages innovation by low productivity firms. |
| Keywords: | innovation; export; demand shocks; patents |
| JEL: | D21 F13 F14 F41 O30 O47 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:103434&r=all |
| By: | Cornwell, Christopher; Schmutte, Ian M.; Scur, Daniela |
| Abstract: | Firms’ hiring and firing decisions affect the entire labor market. Managers often make these decisions, yet the effects of management on labor allocation remains largely unexplored. To study the relationship between a firm’s management practices and how it recruits, retains and dismisses its employees, we link a survey of firm-level management practices to production and employee records from Brazil. We find that firms using structured management practices consistently hire and retain better workers, and fire more selectively. Good production workers match with firms using structured personnel management practices. By contrast, better managers match with firms using structured operations management practices. |
| Keywords: | labor allocation; managers; management practices; productivity |
| JEL: | M11 J31 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:103404&r=all |
| By: | Tamas Csabafi (Department of Economics, University of Missouri-St. Louis); Max Gillman (Department of Economics, University of Missouri-St. Louis); Ruthira Naraidoo (Department of Economics, University of Pretoria) |
| Abstract: | A technical appendix for “International Business Cycle and Financial Intermediation.” The paper extends a standard two-country international real business cycle model to include financial intermediation by banks of loans and government bonds. Taking in household deposits from home and abroad, the loans are produced by the bank in a Cobb-Douglas production approach such that a bank productivity shock can explain financial data moments. The paper contributes an explanation, for both the US relative to the Euro-area, and the US relative to China, of cross-country correlations of loan rates, deposit rates, and the loan premia. It provides a sense in which financial retrenchment resulted in the US following the 2008 bank crisis, and how the Euro-area and China reacted. The paper contributes evidence of how the Euro-area has been more Önancially integrated with the US, and China less financially integrated, with the Euro-area becoming more financially integrated after the 2008 crisis, and China becoming less so integrated. |
| Keywords: | international real business cycles, financial intermediation, credit spread, bank productivity, 2008 crisis. |
| JEL: | E13 E32 E44 F41 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:msl:workng:1017&r=all |
| By: | Felli, Leonardo; Harris, Christopher |
| Abstract: | This paper investigates the market provision of firm-specific training, and identifies the inefficiencies associated with it. Within a general stochastic learning-by-doing model, there is a potential inefficiency in the market provision of firm-specific training. In order to determine whether this inefficiency is in fact present, we analyze two special cases of the model: the accelerated productivity-enhancement model and the accelerated learning model. In both models, the inefficiency is indeed present. However, the nature of the inefficiency depends on the balance between the two key components of training, namely productivity enhancement and employee evaluation. In the accelerated productivity-enhancement model, training results in an increase in productivity enhancement but no change in employee evaluation, and training is overprovided by the market. In the accelerated learning model, training results in a proportionate increase in both productivity enhancement and employee evaluation, and training is underprovided by the market. In both cases, turnover is inefficiently low. |
| Keywords: | specific human capital; training; learning-by-doing; turnover; productivity enhancement; employee evaluation |
| JEL: | D61 D86 J20 J24 |
| Date: | 2018–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:87222&r=all |
| By: | Vijil,Mariana; Wagner,Laurent; Woldemichael,Martha Tesfaye |
| Abstract: | A supply chain is only as strong as its weakest link. Firms are constantly managing uncertainties, including unexpected delays in the provision of a critical input that can slow down or halt the production process, possibly making the manufacturer miss a delivery deadline. As most exporters are also importers of intermediate goods, supply chain unreliability related to import processing times at the border could impact downstream export dynamics. Exploiting a rich data set built on firm-level information for 48 developing countries over 2006-14, this paper relies on the Poisson pseudo-maximum likelihood estimator to investigate how unpredictability in border clearance times for imports affects manufacturing firms'entry, exit, and survival in export markets. The analysis finds that uncertainty in the time to clear imported inputs impacts neither the entry nor the exit rate, but translates into lower survival rates for new exporters, reducing the number of firms that continue to serve the foreign market beyond their first year of entry. This effect grows larger over time, owing to rising reputational costs to input-importing exporters, and is mainly driven by South-North trade, possibly reflecting the time-sensitivity of buyers in developed countries. The results also reveal heterogeneous effects across export industries, as well as the mediating role of sunk costs of entry in foreign markets, which attenuate the negative effect of uncertainty on survival rates, as firms delay exiting the export market. Most importantly, the measure of uncertainty displays a distinctive effect on export performance, as neither the mean nor the median time to import impacts survival. |
| Keywords: | International Trade and Trade Rules,Common Carriers Industry,Food&Beverage Industry,Plastics&Rubber Industry,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Construction Industry,Business Cycles and Stabilization Policies,General Manufacturing,Employment and Unemployment,Transport Services,Business Environment |
| Date: | 2019–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:8793&r=all |
| By: | Florian Leon (FERDI - Fondation pour les Etudes et Recherches sur le Développement International) |
| Abstract: | The purpose of this paper is to study the persistence of firm growth in Africa using data of formal firms in Senegal from 2006 to 2015, dedicating special attention to high-growth firms. This interest in identifying high-growth firms belongs to the idea that these firms will continue to outperform in the future and create jobs. We document, however, that growth rates are negatively correlated across time, especially for high-growth firms. A top performer is more likely to become a bad performer in the next period than sustain its previous performance. Our analysis also reveals that other indicators of performance (as profitability and productivity in the first period) are unrelated to the persistence of growth. This finding challenges the possibility for policymakers and investors to select persistent high-growth firms by scrutinizing their previous performances. |
| Keywords: | Firms,growth paths,Africa,Senegal,High-growth firms |
| Date: | 2019–12–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02493326&r=all |
| By: | Aterido,Reyes; Hlatshwayo,Ayanda; Pieterse,Duncan; Steenkamp,Andre |
| Abstract: | The formal private sector has a key role to play in fostering growth and reducing unemployment in South Africa?strengthening its performance is therefore critical. This paper looks at firm behaviour, firm entry and exit, job outcomes, and productivity dynamics using firm-level administrative data for South Africa. It is the first paper to benchmark employment and productivity dynamics against various comparator countries for which similar analysis has been undertaken. The paper finds that South Africa has an aged private sector with low firm dynamism and characterized by large firms that hold a large share of employment and revenue, although they are not as productive as micro firms and pay lower wages on average. The paper also finds that job creation is concentrated predominantly in incumbent firms, which are old and large, and job creation from entry and exit is negligible. The static and dynamic productivity decompositions raise a concern that although productive efficiency is gained, it is at least in part at the expense of labor. Large firms are not exploiting economies of scale, and particularly unproductive large firms may drive the weak performance of the private sector. Relatively high wages in South Africa could be partly explained by the inefficient use of labor and negative correlation between productivity and size. Likewise, these larger firms could be responsible for the negative direct impact on jobs of firms raising productivity. |
| Date: | 2019–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:8788&r=all |
| By: | Kankanamge, Sumudu; Gaillard, Alexandre |
| Abstract: | This paper introduces a theory of entrepreneurial assets transfer consistent with empirical evidence and centered around a business for sale market that values firms based on their intangible assets. We consider the key endogenous entrepreneurial choices to purchase, found, sell or liquidate business assets and the equilibrium price designed to capture both the intertemporal and the intangible value of a firm. We distinguish earlystage and mature firms as the latter are less likely to fail, make higher profits and face less stringent financial constraints. We argue that maturity translates the intangible value of a firm. We discipline our model using U.S. surveys and a new dataset of business selling transactions. We show that the absence of the business for sale market leads to a severe drop in aggregate output. Then, decomposing the effects of maturity, we show how they shape aggregate outcomes and wealth concentration. |
| Keywords: | Entrepreneurship, Business transfers, Intangible Assets |
| JEL: | E21 E23 J24 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124109&r=all |
| By: | Boehm, Johannes; Sonntag, Jan |
| Abstract: | This paper studies the prevalence of vertical market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. This relationship holds for both domestic and cross-border mergers, and for domestic and international relationships. It also holds when instrumenting mergers using exogenous downward pressure on the supplier's stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumoured or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place. |
| Keywords: | mergers and acquisitions; market foreclosure; vertical integration; production networks |
| JEL: | L14 L42 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:103401&r=all |
| By: | Bakhtiari, Sasan (Department of Industry, Innovation and Science Australia); Breunig, Robert (Australian National University); Magnani, Lisa (Macquarie University, Sydney); Zhang, Jacquelyn (Australian National University) |
| Abstract: | We review the literature on financial constraints and the performance of small and medium enterprises (SMEs). We consider the important role that SMEs play in the economies of Australia and the Organisation for Economic Cooperation and Development. We examine the role of financial constraints in SME growth, with emphasis on business cycles and credit access. We discuss issues that SMEs face in accessing financial resources for expansion. We look at the literature that evaluates the impact of financial constraints on key outcomes: employment, productivity and wages. We review key policy debates and consider where government involvement might be appropriate. |
| Keywords: | small and medium enterprises (SME), firm financial constraints, government business assistance, employment, wages, productivity, innovation |
| JEL: | D22 L25 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12936&r=all |
| By: | Francesca Calamunci (Università di Messina); Francesco Drago (Università di Catania, CSEFand CEPR) |
| Abstract: | We analyze the economic consequences on firm profitability, performance, and investments of having another firm in the same market affiliated with a criminal organization. We do so by evaluating the spillover effects of a law providing the judicial administration of organized crime firms through the imposition of external managers in order to remove the connection to the criminal organization, and at the same time guarantee the continuity of production. By using detailed information on more than 180,000 companies, we exploit the firms’ yearly variation in the exposure to criminal firms’ judicial administration in their market (in the same province and industry). The empirical design allows us to control for confounding effects at the firm, market, and year levels. The results show that there is a large, positive spillover from the enforcement law, suggesting that the burden the organized crime firms impose on other firms is very large. Firms’ performance and turnover increases by 2.2 and 0.7 percent, respectively, in the first four years after an organized crime firm enters the status of judicial administration. Investments measured by tangible and intangible assets increase with the number of firms entering into judicial administration by 0.75 percent. These results suggest that intensifying confiscation measures against criminal organizations has a strong positive effect on the economy. |
| Keywords: | Organized crime; firm level data; policy evaluation |
| Date: | 2020–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:556&r=all |
| By: | Haltiwanger, John C. (University of Maryland); Spletzer, James R. (U.S. Census Bureau) |
| 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. |
| Keywords: | inequality, industry, occupation |
| JEL: | J3 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12990&r=all |
| By: | Roberto Pinheiro; Daniel Monte |
| Abstract: | With a duopsony model, we show how the degree of labor market slack relates to earnings inequality and firm size distribution across local labor markets and the business cycle. In booms, due to the high aggregate productivity, there is fierce competition with resulting high wages and full employment. During recessions, there is labor market slack and firms enjoy local market power. In periods in which the economy is moving in or out of a recession, there is an “accommodation” phase, with firms shrinking their labor forces and paying lower wages instead of competing for poached workers. We show that the impact of economic shocks on wage dispersion and inequality may vary not only due to the nature of the shock, but also based on which equilibrium the economy may have settled in. |
| Keywords: | Labor Market Slack; Wage Inequality |
| JEL: | J21 J23 J42 L13 |
| Date: | 2020–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:87536&r=all |
| By: | Jin, Zhangfeng; Pan, Shiyuan |
| Abstract: | This study examines the causes and consequences of incentive pay adoption among Chinese manufacturing firms. First, we find that a higher degree of labor scarcity encourages firms to adopt more incentive pay. Second, using an instrumental variables approach, we find that a 10 percentage point increase in the intensity of incentive pay results in 38% higher firm productivity. Third, the average productivity differences between SOEs and non-SOEs decrease by about 65% after controlling differences in incentive pay adoption. Therefore, facilitating incentive pay adoption among firms with better labor endowments (e.g. SOEs) increases productivity while reduces resource misallocation in developing countries. |
| Keywords: | Incentive Pay,Firm Productivity,Labor Scarcity,China,Instrumental Variables |
| JEL: | O14 O33 M52 J33 P31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:479&r=all |