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on Business Economics |
| By: | Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management); Mu-Jeung Yang (University of Washington - Department of Economics); Bryan Hong (New York University (NYU) - Leonard N. Stern School of Business) |
| Abstract: | What determines the life-cycle of businesses? Exploiting unique firm-level panel data on internal organization and innovation we establish three key sets of stylized facts to inform recent theories of firm life-cycles. First, life-cycle effects are driven by startups, not by new establishments of existing firms. Second, organizational restructuring and innovation are both strongly correlated with firm growth but not with firm age, in contrast to passive learning theories of firm dynamics. Third, there are important sectoral differences in innovation activities which are monotonically increasing in firm size for manufacturing firms but hump-shaped for firms in service industries. |
| Keywords: | firm life-cycle, organizational capital, innovation |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2034&r=all |
| By: | Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management); Nicholas Li (University of Toronto - Department of Economics); Mu-Jeung Yang (University of Washington - Department of Economics) |
| Abstract: | How do firms in high-income countries adjust to emerging market competition? We estimate how a representative panel of Canadian firms adjusts innovation activities, business strategies, and exit in response to large increases in Chinese imports. Whether firms invest in process or product innovation matters: on average, the number of process innovations declines more strongly than the number of product innovations. In addition, firms that initially pursue process innovation strategies and survive have higher profits ex-post, but are ex-ante more likely to exit. In contrast, firms that initially pursue product innovation strategies have higher profits if they survive, without significant impact on exit. Both empirical patterns are consistent with our theory, which suggests that innovation strategies do not ensure insulation against competitive shocks, but instead increase risk. |
| Keywords: | International Competition, Innovation, Management Practices, Firm Performance |
| JEL: | F14 L2 O3 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2035&r=all |
| By: | Liew, Chee Yoong; Devi, S.Susela |
| Abstract: | This paper examines the relationship between the number of domestic banks that the firm engages with and firm value and how this relationship is moderated by ownership concentration at low and very high level on a sample of Malaysian family and non-family firms. We find that there is a significant negative relationship between the number of domestic banks engaged by family firms, operating in industries where these firms do not have absolute monopoly, and firm value. However, there is no evidence that this significant negative firm value effect is stronger in family firms compared to non-family firms. Furthermore, the significant positive moderating effect of ownership concentration on this relationship within family firms in such industries is evident only at low level of ownership concentration. Interestingly, at very high level of ownership concentration, this significant positive moderating effect becomes negative. There is no evidence that these significant moderating effects are stronger in family firms compared to non-family firms. An implication of this research is that there is a need for the capital market regulators to introduce appropriate policies to deter family firms from having a close relationship with domestic banks as well as monitor the number of domestic banks engaged by such firms. There may be policy implications for consideration by the Central Bank of Malaysia as well. |
| Keywords: | corporate governance, banks, family firms, agency problems |
| JEL: | G30 G32 G39 |
| Date: | 2020–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99704&r=all |
| By: | Liew, Chee Yoong; Ko, Young Kyung; Song, Bee Lian; Murthy, Saraniah Thechina |
| Abstract: | In emerging markets, the issue of directors’ remuneration being used as an expropriation channel by controlling shareholders is a significant problem to be investigated. In this study, using the fixed effect method, we examine the relationship between directors’ remuneration and firm performance, and tests whether independent directors’ tenure within the remuneration committee moderates this relationship in a sample of Malaysian public-listed firms. We find that directors’ remuneration is not significantly associated with firm performance and hence, not used as a channel of expropriation by controlling shareholders. Our results also show that longer tenure of the independent directors within the remuneration committee is negatively related with firm value. However, when directors’ remuneration increase simultaneously with the tenure of the independent directors within the remuneration committee, firm value increased. This increment is stronger in family firms compared to non-family firms. These findings may provide policy implications with respect to how the Securities Commission (SC) could design and implement proper rules and regulations to govern the tenure of the independent directors within the remuneration committee in East Asian emerging market firms where agency problem type II is prevalent and ownership is highly concentrated. |
| Keywords: | directors’ remuneration; family firms; agency problems; Malaysia; corporate governance. |
| JEL: | G30 G39 |
| Date: | 2019–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99703&r=all |
| By: | Bryan Hong (New York University (NYU) - Leonard N. Stern School of Business); Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management); Mu-Jeung Yang (University of Washington - Department of Economics) |
| Abstract: | Complementarity between performance pay and other organizational design elements has been argued to be one potential explanation for stark differences in the observed productivity gains from performance pay adoption. Using detailed data on internal organization for a nationally representative sample of firms, we empirically test for the existence of complementarity between performance pay incentives and decentralization of decision-making authority for tasks. To address endogeneity concerns, we exploit regional variation in income tax progressivity as an instrument for the adoption of performance pay. We find systematic evidence of complementarity between performance pay and decentralization of decision-making from principals to employees. However, adopting performance pay also leads to centralization of decision-making authority from non-managerial to managerial employees. The findings suggest that performance pay adoption leads to a concentration of decision-making control at the managerial employee level, as opposed to a general movement towards more decentralization throughout the organization. |
| Keywords: | performance pay, decentralization, management practices |
| JEL: | D2 G29 H32 J33 L2 M1 M5 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2031&r=all |
| By: | Ettore Gallo (Department of Economics, New School for Social Research); Gustavo Pereira Serra (Department of Economics, New School for Social Research) |
| Abstract: | The recent debate in Post-Keynesian theories of investment has mainly focused on the endogenous nature of the degree of capacity utilization, overlooking Steindl’s and Minsky’s insights on the role of inventories and debt financing in shaping investment decisions. In order to fill this gap, this paper develops a Steindl-Minsky SFC model by including inventories, as well as firm’s deposits and debt financing into the investment function. The role of investment decisions in shaping economic growth is assessed by considering a model populated by five types of economic actors: workers, firms, rentiers, commercial banks and the central bank. First, business cycle fluctuations are investigated assuming a deterministic steady growth path in the long period, in line with recent developments in heterodox growth theory. Second, we simulate the model, calibrating it for the US economy. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2005&r=all |
| By: | Cathles, Alison; Nayyar, Gaurav; Rückert, Désirée |
| Abstract: | As the productivity of the European economy shows signs of slowing down, many hopes are pinned on digital technologies to reverse this trend. This study uses data from the EIBIS 2019 survey to examine whether the adoption of different digital technologies (such as advanced robotics, 3D printing, or Internet of Things) by firms in the EU have different impacts on productivity. It also examines whether these different technologies have different implications for employment growth, and whether there are complementarities between technologies when it comes to firm performance. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:202006&r=all |
| By: | Mario Benassi (Department of Economics, Management, and Quantitative Methods, University of Milan); Elena Grinza (Department of Management and Production Engineering, Politecnico di Torino); Francesco Rentocchini (Department of Economics, Management, and Quantitative Methods, University of Milan); Laura Rondi (Department of Management and Production Engineering, Politecnico di Torino) |
| Abstract: | Drawing on the knowledge-based view of the firm, we investigate whether firm performance is related to the accumulated stock of technological knowledge associated with the Fourth Industrial Revolution (4IR), and what contextual factors affect this relationship. We test our research questions on a longitudinal matched patent-firm data set on medium and large firms filing 4IR patents at the European Patent Office (EPO). Our results show a significant and economically relevant positive association between the development of 4IR technologies and firm productivity, but no relationship with its profitability, thereby suggesting that the returns from costly technological investments are slow to cash in. We also find that late entrants benefit more from the development of 4IR technological capabilities than early entrants and experience a substantial “boost effect”. We provide empirical support to an explanation of these findings in terms of the ability of late entrants to (i) manage the inherent complexity of the bundle of technologies comprising the 4IR and (ii) exploit profitable downstream applications of the 4IR. |
| Keywords: | Fourth Industrial Revolution (4IR); patenting; technology development; firm performance; longitudinal matched patent-firm data |
| JEL: | O33 D24 J24 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:srt:wpaper:0720&r=all |
| By: | Rückert, Désirée; Veugelers, Reinhilde; Weiss, Christoph |
| Abstract: | Using a new survey on digitalisation activities of firms in the EU and the US, we identify digitalisation profiles based on the current use of digital technologies and future investment plans in digitalisation. Our analysis confirms the trend toward digital polarisation and a growing digital divide in the corporate landscape with, on one side, many firms that are not digitally active, and on the other side, a substantial number of digitally active firms forging ahead. Old small firms, with less than 50 employees and more than 10 years old, are significantly more likely to be persistently digitally non-active. We show that these persistently non-digital firms are less likely to be innovative, increase employment or command higher mark-ups. These trends are likely to exacerbate the digital divide across firms in the EU and the US. |
| Keywords: | digital technology,investment,firm performance |
| JEL: | D22 E22 L25 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:202007&r=all |
| By: | Elena Grinza (Department of Management and Production Engineering, Politecnico di Torino, Italy) |
| Abstract: | This paper investigates the impact of a firm's worker flows on productivity by using unique longitudinal matched employer-employee data. The analysis splits the firm's total worker flows into three components: workers' replacements (excess worker flows), hirings meant to increase the firm's employment level (net hirings), and separations of workers intended to decrease the firm's workforce (net separations). This allows isolating the impact of workers' replacements, which represent the most prominent (and compelling) feature of worker mobility. Endogeneity is dealt with by using a modified version of the Ackerberg et al.'s (2015) control function method, which explicitly accounts for firm fixed effects. The main finding is that excess flows foster productivity, and so do net hirings, while net separations hurt it. The effect of excess flows is heterogeneous and varies widely based on the types of replacements, the categories of workers involved, and the types of firms experiencing such flows. Overall, the findings of this paper highlight the importance of reallocation dynamics to reach better employer-employee matches and call for a reconsideration of policies concerning the flexibility of the labor market. |
| Keywords: | Worker flows, excess worker flows, firm productivity, semi-parametric estimation of production functions, longitudinal matched employer-employee data. |
| JEL: | J63 D24 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:tur:wpapnw:065&r=all |