nep-bec New Economics Papers
on Business Economics
Issue of 2020‒04‒06
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Immigration and Worker-Firm Matching By Gianluca Orefice; Giovanni Peri
  2. Workforce composition, productivity and pay: the role of firms in wage inequality By Chiara Criscuolo; Alexander Hijzen; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Balazs Stadler; Richard Upward; Wouter Zwysen; Katarzyna Grabska; Ryo Kambayashi; Timo Leidecker; Oskar Nordström Skans; Capucine Riom; Duncan Roth
  3. Internationalization and family ownership. Does the life-cycle of destination markets matter? By Marco Cucculelli; Yu Sun; Yi Zhu
  4. The Economic Impact of Organized Crime Infiltration in the Legal Economy: Evidence from the Judicial Administration of Organized Crime Firms By Calamunci, Francesca; Drago, Francesco
  5. Market structure, common ownership and coordinated manager compensation By Neus, Werner; Stadler, Manfred; Unsorg, Maximiliane
  6. Borrowing constraints and export decision : the case of Vietnamese exporters By T.T.A. Duong; C.J.M. Kool; L. Zhang
  7. The Risk of Caution: Evidence from an R&D Experiment By Richard Carson; Joshua S. Graff Zivin; Jordan Louviere; Sally Sadoff; Jeffrey G. Shrader Jr
  8. Cross-border Investments and Uncertainty Firm-level Evidence By Rafael Cezar; Timothée Gigout; Fabien Tripier
  9. Productivity, Efficiency and Firm Size Distribution: Evidence from Vietnam By Hien Thu Pham; Nhan Buu Phan; Shino Takayama
  10. The Innovation Premium to Soft Skills in Low-Skilled Occupations By Philippe Aghion; Antonin Bergeaud; Richard Blundell; Rachel Griffith
  11. International information flows, sentiments and cross-country business cycle fluctuations By Michał Brzoza-Brzezina; Jacek Kotłowski; Grzegorz Wesołowski

  1. By: Gianluca Orefice; Giovanni Peri
    Abstract: The process of matching between firms and workers is an important mechanism in determining the distribution of wages. In a labor market characterised by large dispersion of workers' productivity and worker-firm complementarity, high quality firms have strong incentives to screen for the quality of workers. This process will increase the positive quality association of firm-worker matches known as positive assortative matching (PAM). Immigration in a local labor market, by increasing the variance of workers abilities, may drive stronger PAM between firms and workers. Using French matched employer-employee (DADS) data over the period 1995-2005 we document that positive supply-driven changes of immigrant workers in a district increased the strength of PAM. We then show that this association is consistent with causality, is quantitatively significant, and is associated with higher average productivity and firm profits, but also with higher wage dispersion. We also show that the increased degree of positive assortative matching is mainly reached by high-productive firms "losing" lower quality workers and "attracting" higher quality workers.
    JEL: F22 J24 L25
    Date: 2020–03
  2. By: Chiara Criscuolo; Alexander Hijzen; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Balazs Stadler; Richard Upward; Wouter Zwysen; Katarzyna Grabska; Ryo Kambayashi; Timo Leidecker; Oskar Nordström Skans; Capucine Riom; Duncan Roth
    Abstract: In many OECD countries, low productivity growth has coincided with rising inequality. Widening wage and productivity gaps between firms may have contributed to both developments. This paper uses a new harmonised cross-country linked employer-employee dataset for 14 OECD countries to analyse the role of firms in wage inequality. The main finding is that, on average across countries, changes in the dispersion of average wages between firms explain about half of the changes in overall wage inequality. Two thirds of these changes in between-firm wage inequality are accounted for by changes in productivity-related premia that firms pay their workers above common market wages. The remaining third can be attributed to changes in workforce composition, including the sorting of high-skilled workers into high-paying firms.
    Keywords: firm wage premium, productivity, wage inequality
    JEL: D2 J31 J38
    Date: 2020–03–24
  3. By: Marco Cucculelli (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche); Yu Sun (London School of Economics and Political Science); Yi Zhu (mail: Universite' Catholique de Louvain (Belgium) and Universita' Politecnica delle Marche)
    Abstract: Despite the conventional view on family firms that are slow to venturing into foreign markets, Hennart et al. (J Int Bus Stud, 2019) show that family firms in high-quality niche businesses are able to overcome the internationalization barriers. Eddleston et al. (J Int Bus Stud, 2019) counterpoint it by arguing that the effect only conditionally holds when external and internal contexts are considered, specified as pro-market development and professionalization practices respectively. We extend Hennart et al.'s (2019) and Eddleston et al'i.s (2019) research by explicitly considering the heterogeneity in the life-cycle of destination markets. Specifically, we show that family firms, no matter selling niche or mass products, are encouraged to internationalize given satisfactory market growth potential - an external context, as in Eddlelston et al. 2019. We develop a two-period competition model with logistic market growth to assess the role of the life cycle of export markets on the decision to entry. The empirical evidence shows that family firms are more likely to enter markets with high growth potential in their early stages of development. We also test a pricing-to-market model to show that a replication strategy, which consists of exporting products already sold in domestic markets, is a viable entry strategy for (price-taking) family firms.
    Keywords: internationalization, family firms, life-cycle, potential market growth, replication strategy, mass and niche products
    JEL: F23 F14 G32 L60
    Date: 2020–03
  4. By: Calamunci, Francesca (University of Messina); Drago, Francesco (University of Messina)
    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
    JEL: H00 H32 J00 K14
    Date: 2020–03
  5. By: Neus, Werner; Stadler, Manfred; Unsorg, Maximiliane
    Abstract: We study oligopolistic competition in product markets where the firms' quantity decisions are delegated to managers. Some firms are commonly owned by shareholders such as index funds whereas the other firms are owned by independent shareholders. Under such an asymmetric ownership structure, the common owners have an incentive to coordinate when designing the manager compensation schemes. This implicit collusion induces a less aggressive output behavior by the coordinated firms and a more aggressive behavior by the noncoordinated firms. The profits of the noncoordinated firms are increasing in the number of coordinated firms. The profits of the coordinated firms exceed the profits without coordination if at least 80 % of the firms are commonly owned - an astonishing resemblance to the merger literature.
    Keywords: Common ownership,index funds,shareholder coordination,manager com-pensation
    JEL: G32 L22 M52
    Date: 2020
  6. By: T.T.A. Duong; C.J.M. Kool; L. Zhang
    Abstract: This paper examines the impact of borrowing constraints and productivity on the export decision of Vietnamese firms, where we approximate borrowing constraints by leverage and the tangible asset ratio. Using a large firm-level dataset for the years 2009-2014, we show that borrowing constraints play an important role in the export decision. There is an inverse U-shaped relationship between leverage and the export probability for private manufacturers. The marginal effect of leverage is declining with leverage, but positive up till a leverage ratio of about 47 percent and negative beyond. Borrowing constraints matter both for the decision to start exporting and for the decision to continue exporting, but more so for the latter. Medium and high productive firms are more sensitive to borrowing constraints than low productive firms.
    Keywords: international trade, heterogeneous firms, non-linear effects, probit analysis, leverage, productivity, credit constraints
    Date: 2019–12
  7. By: Richard Carson; Joshua S. Graff Zivin; Jordan Louviere; Sally Sadoff; Jeffrey G. Shrader Jr
    Abstract: Innovation is important for firm performance and broader economic growth. But breakthrough innovations necessarily require greater risk-taking than more incremental approaches. To understand how managers respond to uncertainty when making research and development decisions, we conducted three experiments with master’s degree students in a program focused on the intersection of business and technology. Study participants were asked to choose whether to fund hypothetical research projects using a process that mirrors real-world research and development funding decisions. The experiments provided financial rewards that disproportionately encouraged the choice of higher-risk projects. Despite these incentives, most participants chose lower-risk projects at the expense of projects more likely to generate a large payoff. We also elicited participants’ personal risk preferences and found that decision-makers who are more tolerant of risk were more likely to fund breakthrough projects. The results suggest that the risk preferences of managers in charge of research investments may have an oversized effect on the rate of breakthrough innovation and the profitability of firms.
    JEL: D8 G11 O3
    Date: 2020–03
  8. By: Rafael Cezar; Timothée Gigout; Fabien Tripier
    Abstract: This paper studies the impact of uncertainty on cross-border investments. We build a data-set of firm-level outward Foreign Direct Investments between 2000 and 2015. We create a time and country varying measure of uncertainty based on the dispersion of idiosyncratic investment returns. An increase in uncertainty delays cross-border flows to the affected country. Yet, this average effect hides strong heterogeneity. Firms with low ex-ante performance durably reduce their foreign investments. Meanwhile high-performing firms increase their investments after the initial shock. We interpret these results as the evidence of a cleansing effect of uncertainty shocks among multinational firms in the presence of financial frictions.
    Keywords: Uncertainty;Asymmetric Uncertainty;FDI flows;FDI Returns;Volatility;Multinational Firms
    JEL: D81 F23 G10 G15
    Date: 2020–03
  9. By: Hien Thu Pham (CSIRO, QLD, Australia); Nhan Buu Phan (School of Economics, University of Queensland); Shino Takayama (School of Economics, University of Queensland)
    Abstract: By applying recently developed methodologies to Vietnamese data from 2000 to 2016, this paper studies production efficiencies and total factor productivity in manufacturing industries, using two separate empirical methodologies. The paper shows that middle-sized firms’ production efficiencies tend to be lower than those of small-sized or large-sized firms in most of the manufacturing industries, and that the middle-sized firms are quite diverse in terms of efficiencies. Further, we show that the level of productivity is also quite diverse across different firm sizes in most industries. Given these observations, we present a simple theoretical analysis to indicate how our empirical findings could affect a firm’s decision in expanding business size. Over the past few decades, the Vietnamese government has conducted policies to promote small-sized and middlesized firms. Our findings indicate the importance of adopting policies that reduce the uncertainty that those firms may possibly face, such as financial support.
    Date: 2020–03–26
  10. By: Philippe Aghion; Antonin Bergeaud; Richard Blundell; Rachel Griffith
    Abstract: Matched employee-employer data from the UK are used to analyze the wage premium to working in an innovative firm. We find that firms that are more R&D intensive pay higher wages on average, and this is particularly true for workers in some low-skilled occupations. We propose a model in which a firm's innovativeness is reflected in the degree of complementarity between workers in low-skill and high-skilled occupations, and in which non-verifiable soft skills are an important determinant of the wages of workers in low-skilled occupations. The model yields additional predictions on training, tenure and outsourcing which we also find support for in data.
    Keywords: : Innovation, Skill-biased Technological Change, Wage, Complementarity.
    JEL: O33 L23 J31
    Date: 2019
  11. By: Michał Brzoza-Brzezina; Jacek Kotłowski; Grzegorz Wesołowski
    Abstract: Business cycles are strongly correlated between countries. One possible explanation (beyond traditional economic linkages like trade or finance) is that consumer or business sentiments spread over boarders and a ect cyclical uctuations in various countries. We first lend empirical support to this concept by showing that sentiments travel between countries at a speed much higher than can be explained by traditional linkages. Then we construct a two-economy new Keynesian model where noisy international information can generate cyclical fluctuations (comovement of GDP, consumption, investment and in ation) in both countries. Estimation with US and Canadian data reveals a significant role of international noise shocks in generating common fluctuations - they explain between 15-30% of consumption variance in the US and Canada and raise the correlation between these variables by up to unity in periods of sentiment breakdowns. We also show that our estimated noise shock has a clear interpretation as a sentiment shock.
    Keywords: International spillovers, animal spirits, sentiments, business cycle
    JEL: C32 E32 F44
    Date: 2020–03

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